QUESTION 36 The following account balances at the beginning of January were sele
ID: 2336052 • Letter: Q
Question
QUESTION 36
The following account balances at the beginning of January were selected from the general ledger of Fresh Bagel Manufacturing Company:
Additional data:
1. Actual manufacturing overhead for January amounted to $65,500.
2. Total direct labor cost for January was $64,000.
3. The predetermined manufacturing overhead rate is based on direct labor cost. The budget for the year called for $255,000 of direct labor cost and $382,500 of manufacturing overhead costs.
4. The only job unfinished on January 31 was Job No. 151, for which total direct labor charges were $6100 (1700 direct labor hours) and total direct material charges were $15,000.
5. Cost of direct materials placed in production during January totaled $123,900. There were no indirect material requisitions during January.
6. January 31 balance in raw materials inventory was $35,400.
7. Finished goods inventory balance on January 31 was $35,000.
Has manufacturing overhead been overallocated or underallocated and by what amount as of January 31?
$15,100 underallocated
$30,500 underallocated
$30,500 overallocated
$15,100 overallocated
Work in process inventory $0 Raw materials inventory $28,800 Finished goods inventory $40,400Explanation / Answer
Correct Answer $30,500 overallocated
Calculations
Working
Calculation of Predetermined Overhead rate
(A)
Total estimated Manufacturing Overheads
$ 382,500.00
(B)
Total Direct labor cost
$ 255,000.00
(A/B)
Predetermined overhead rate per Labor $
$ 1.50
Calculation of Under or Overapplied Overheads
(A)
Predetermined overhead rate per Labor $
$ 1.50
(B)
Direct labor cost
$ 64,000.00
C=(AxB)
Manufacturing overheads applied
$ 96,000.00
(D)
Actual Manufacturing ovrheads
$ 65,500.00
E= (D-C)
Overallocated Overheads
$ 30,500.00
Calculation of Predetermined Overhead rate
(A)
Total estimated Manufacturing Overheads
$ 382,500.00
(B)
Total Direct labor cost
$ 255,000.00
(A/B)
Predetermined overhead rate per Labor $
$ 1.50