In December 2014 Custom Mfg established its predetermined ov

In December 2014, Custom Mfg. established its predetermined overhead rate for jobs produced during year 2015 by using the following cost predictions: overhead costs, $420,000, and direct labor costs, $200,000. At year-end 2015, the company\'s records show that actual overhead costs for the year are $1,073,200. Actual direct labor cost had been assigned to jobs as follows. Jobs completed and sold Jobs in finished goods inventory Jobs in work in process inventory 390,000 70,000 47,000 Total actual direct labor cost 507,000 value: 1.71 points 1. Determine the predetermined overhead rate for year 2015. Overhead Rate Choose Numerator: Choose Denominator: Overhead Rate Overhead rate

Solution

1 Estimated overhead costs/Estimated direct labor costs = Overhead rate 420000/200000 = 210% 2 Factory overhead Actual overhead 1073200 1064700 Applied overhead Underapplied overhead 8500 Overhead applied to jobs = 507000*210% = 1064700 4 Cost of goods sold 8500         Factory overhead 8500