Question

In December 2010, Gomez Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,020 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.

  

Indirect labor	$	167,650
Factory supervision		123,000
Rent on factory building		76,000
Factory utilities		46,000
Factory insurance expired		35,100
Depreciation—Factory equipment		249,000
Repairs expense—Factory equipment		31,500
Factory supplies used		34,400
Miscellaneous production costs		10,000
Total estimated overhead costs	$	772,650

  

At the end of 2011, records show the company incurred $723,096 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $348,000; Job 202, $324,000; Job 203, $167,000; Job 204, $416,000; and Job 205, $174,000. In addition, Job 206 is in process at the end of 2011 and had been charged $10,600 for direct labor. No jobs were in process at the end of 2010. The company’s predetermined overhead rate is based on direct labor cost.

  

Required
1a.	Determine the predetermined overhead rate for year 2011. (Omit the "%" sign in your response.)

  

Predetermined overhead rate

%

  

1b.	Determine the total overhead cost applied to each of the six jobs during year 2011. (Omit the "$" sign in your response.)

  

Job No.	Applied Overhead
201	$
202
203
204
205
206
Total	$

  

1c.	Determine the over- or underapplied overhead at year-end 2011. (Input all amounts as positive values.Omit the "$" sign in your response.)

  

(Click to select)Overapplied overheadUnderapplied overhead

$

  

2.	Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of year 2011. (Omit the "$" sign in your response.)

  

Date	General Journal	Debit	Credit
Dec. 31	(Click to select)CashFactory overheadFactory payrollGoods in process inventoryAccounts receivableCost of goods soldSalesFinished goods inventory
	(Click to select)Cost of goods soldFinished goods inventoryCashAccounts receivableGoods in process inventoryFactory payrollFactory OverheadSales

Answer 1

1a)	predetermined overhead rate
	estimated MOH/estimated direct labor cost
	772,650/(50*2020*15)
	51.00%
1b)	total overhead cost applied = direct labor cost of each job*51%
	Job No
	201		177480
	202		165240
	203		85170
	204		212160
	205		88740
	206		5406
	total		734196
1c)	Actual overhead				723,096
	Applied overhead				734196
	overhead	over applied by		11,100
2)	Date	General journal			Debit	Credit
	31-Dec	Maufacturing overhead			11,100
		Cost of goods sold				11,100