In December 2016 Custom Mfg established its predetermined ov

In December 2016, Custom Mfg. established its predetermined overhead rate for using the following cost predictions: overhead costs, $750,000, and direct materials costs, $300,000. At year-end 2017, the company\'s records show that actual overhead costs for the year are $1.214,700. Actual direct material cost had been assigned to jobs as follows. jobs produced during 2017 by Jobs completed and sold Jobs in finished goods inventory $360,000 70,000 Jobs in work in process inventory52,000 Total actual direct materials cost $482,000 1. Determine the predetermined overhead rate for 2017 2&3. Enter the overhead costs incurred and the amounts applied during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied 4. Prepare the adjusting entry to allocate any over-or underapplied overhead to Cost of Goods Sold

Solution

Answer =1 CALCULATION OF THE RECOVERY RATE OF OVERHEAD Estimated Overhead Cost \"/\"   Estimated Direct material Cost \"=\" Overhead Rate $                                     7,50,000 \"/\"   $                       3,00,000 \"=\" 250% Answer =2 FACTORY OVERHEAD Amount Amount Actual Ovehead $         12,14,700.00 1205000 Applied Ovehead ($ 482,000 X 250% ) $                       9,700.00 Underapplied Overhead Total $         12,14,700.00 $               12,14,700.00 Anser = Under Applied Ovehead = $ 9700 Answer =3 JOUNRAL ENTRIES DATE GENERAL JOURNAL DEBIT CREDIT Dec - 31 Cost of Goods Sold --------------------- $                          9,700        To Factory Overhead $                    9,700 (To Record the underapplied overhead)