E32A EXERCISES SET A Calculate and Use Overhead Rate Selecte

EXERCISES- SET A Calculate and Use Overhead Rate Selected data for the consulting department of Austin Consulting Inc., follow: E3-1A. Estimated consulting overhead cost for the year..... . . . . $270,000 Estimated direct labor cost for the year (@$9/hr.)...._ . . . . .. . . ..180,000 Actual manufacturing overhead cost for January . . . . . . . . . Actual direct labor cost for January (1,200 hours). .. . . . . . . . 11,000 16,000 Assuming that direct labor cost is the basis for applying consulting overhead a. Calculate the predetermined overhead rate. b. Prepare a journal entry that applies consulting overhead for January c. By what amount is consulting overhead over- or underapplied in January? Calculate and Use Overhead Rate Using the data in Exercise 3-1A, but assuming that the basis fo applying consulting overhead is direct labor hours, complete requirements (a) through (c). E3-2A.

Solution

Calculate predetermine overhead rate :

Predetermine overhead rate = Estimated overhead/estimated direct labour costt

= 270000/180000

Predetermine overhead rate = 1.5 per $

b) Journal entry on applied overhead :

c) Calculate over or under applied overhead :

Over/(Under) Applied overhead = Applied overhead-actual overhead

= 16500-16000

Over applied overhead = 500

Date	accounts & explanation	debit	credit
	Work in process a/c (11000*1.5)	16500
	Manufacturing overhead		16500
	(To record overhead applied)