Hartley uniforms produces uniforms produces uniforms The com

Hartley uniforms produces uniforms.

produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses.

Hartley UniformsHartley Uniforms

reports the following cost data for the past year:

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(Click the icon to view the cost data.)Read the requirements

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.

Requirement 1. Compute the predetermined manufacturing overhead rate.

Enter the formula for predetermined manufacturing overhead rate, then compute the rate.

Estimated yearly overhead costs

/

Estimated yearly machine hours

=

Predetermined overhead rate

$194,400

/

7,200

=

$27

per machine hour

Requirement 2. Calculate the allocated manufacturing overhead for the past year.

Manufacturing

Actual machine hours

x

Predetermined overhead rate

=

overhead allocated

6,300

x

$27

=

$170,100

Requirement 3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of?

First calculate the preliminary manufacturing overhead balance using the T-account.

Manufacturing Overhead

Actual indirect materials

50,500

Manufacturing overhead allocated

170,100

Actual indirect manufacturing labor

42,000

Actual depreciation on plant and equipment

72,500

Actual plant utilities

38,400

End Bal

33,300

Close the under- or overallocated overhead to Cost of Goods Sold by journalizing the entry. (Record debits first, then credits. Exclude explanations from any journal entries.)

Journal Entry

Date

Accounts

Debit

Credit

DATA TABLE

Budget

Actual

Direct labor hours. . . . . . . . . . . . . . . . . . . . . . . .

7,600

hours

6,100

hours

Machine hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,200

hours

6,300

hours

Depreciation on salespeople\'s autos. . . . . . . . . . . .

$23,000

$23,000

Indirect materials. . . . . . . . . . . . . . . . . . . . . . . .

$48,500

$50,500

Depreciation on trucks used to deliver uniforms

to customers. . . . . . . . . . . . . . . . . . . . . . . . . .

$13,000

$11,000

Depreciation on plant and equipment. . . . . . . . . .

$70,000

$72,500

Indirect manufacturing labor. . . . . . . . . . . . . . . . .

$40,000

$42,000

Customer service hotline. . . . . . . . . . . . . . . . . . . . . .

$19,000

$21,000

Plant utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$35,900

$38,400

Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$72,500

$85,500

Estimated yearly overhead costs

/

Estimated yearly machine hours

=

Predetermined overhead rate

Solution

Solution:

Requirement 1. Compute the predetermined manufacturing overhead rate --- It is calculated correctly in the question. However I can provide you the explanation if needed, please let me know.

Requirement 2. Calculate the allocated manufacturing overhead for the past year --- This part is also done correctly. However I can provide you the explanation if needed, please let me know.

Requirement 3

Calculation of under or over allocated manufacturing overhead

Manufacturing Overhead expenses are usually applied to production on the basis of pre-determined rates.

Over-applied Overheads ----- If Applied Manufacturing Overheads are higher than the actual overheads incurred, the difference is called Over Applied Overhead.

Under-applied Overheads ----- If Applied Manufacturing Overheads are lesser than the actual overheads incurred, the difference is called Under Applied Overhead.

Here in the question,

Applied Manufacturing Overheads (as calculated in Requirement 2) = $170,100

Actual Manufacturing Overheads Incurred (as per T Account) = $50,500 + $42,000 + $72,500 + $38,400 = $203,400

It means Applied Manufacturing Overheads are lesser than Actual overheads. Hence Overheads are under-applied.

Under Applied Overhead = Actual Manufacturing Overheads – Applied Manufacturing Overheads

= $203,400 - $170,100

= $33,300

Disposition of Under Applied Overheads

Generally, Over or Under Applied Overheads are disposed off to Cost of Goods Sold.

General Journal

Debit

Credit

Cost of Goods Sold

$33,300

   Under-Applied Manufacturing Overhead

    or

   Manufacturing Overhead Account

$33,300

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

General Journal	Debit	Credit
Cost of Goods Sold	$33,300
Under-Applied Manufacturing Overhead     or    Manufacturing Overhead Account		$33,300