JobOrder Costing EXERCISE 314 Computing Predetermined Overhe

Job-Order Costing EXERCISE 3-14 Computing Predetermined Overhead Rates and Job Costs [LO3-1, LO3-2, LO3-3, LO3-7] Moody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production . Fixed manufacturing overhead cost . . . . . … . . . . . . 100,000 $650,000 $3.00 Required: 1. Compute the predetermined overhead rate. 2. During the year, Job 400 was started and completed. The following information was available with respect to this job: $450 $210 40 Compute the total manufacturing cost assigned to Job 400. During the year, the company worked a total of 146,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,350,000. What is the amount of underap- plied or overapplied overhead for the year? If this amount were closed out entirely to Cost of Goods Sold would the journal entry increase or decrease net operating income? 3. EKERCISE 3-15 Departmental Overhead Rates [LO3-1, LO3-2, LO3-3] Cutting and Finishing. The company uses a job-order

Solution

Answer 1. Predetermined Overhead Rate = Estimated Total Overhead / Estimated Allocation Base Manufacturing Overhead: Fixed Manufacturing Overhead        650,000.00 Variable MOH - $3 X 100,000 Hrs        300,000.00 Total Overhead        950,000.00 Predetermined Overhead Rate = $950,000 / 100,000 Mach Hrs Predetermined Overhead Rate = $9.50 per machine hr. Answer 2. Calculation of Total Manufacturing Costs of Job 400 Direct Material                450.00 Direct Labor                210.00 Overhead - $9.50 X 40 mach hrs                380.00 Total Manufacturing Costs            1,040.00 Answer 3. Overhead Applied = 146,000 mach hrs X $9.50 Overhead Applied = $1,387,000 Overhead Applied    1,387,000.00 Actual Overhead    1,350,000.00 Overapplied Overhead          37,000.00 Journal Entry Particulars Dr. Amt. Cr. Amt. Manufacturing Overhead          37,000.00 Cost of Goods Sold      37,000.00 (Record the overapplied manufacturing overhead)