Question

ABC Manufacturing uses normal costing and allocates manufacturing overhead to jobs based on a budgeted direct labor-hour rate for the actual direct labor hours. Any overallocated or underallocated overhead is written-off to the cost of goods sold at the end of the month. During April 2019, ABC Manufacturing recorded the following:

Budgeted manufacturing overhead costs: $400,000

Budgeted direct labor-hours: 20,000 DLHRS

Budgeted machine hours: 16,000 MHRS

Actual manufacturing overhead costs: $360,000

Actual direct labor-hours:   22,500 DLHRS

Actual machine hours: 15,000 MHRS

Jobs #22, #23, and #24 were started and completed in April.

There were no jobs in the process at the beginning or end of April. Actual costs and resources used by each job are listed below:

Job #22 Job #23 Job #24

Direct Materials Used $40,000 $25,000 $30,000

Direct Labor Hours 9,000 6,000 7,500

Direct Labor Wage Rate $15/hour $15/hour $15/hour

Machine Hours 6,000 4,000 5,000

A. Calculate the predetermined overhead rate used for allocating manufacturing overhead?

B. Calculate the amount of manufacturing overhead allocated to Job #24 during the month of April?

C. Calculate ABC Manufacturing’s cost of goods manufactured (CGM) for April 2019?

D. What is the accounting adjusting entry to close out the overallocated or underallocated manufacturing overhead on April 30?

Answer 1