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In December 2016, Infodeo established its predetermined overhead rate for movies produced during 2017 by using the following cost predictions: overhead costs, $1,600,000,and direct labor costs, $400,000. At year-end 2017, the company’s records show that actual overhead costs for the year are $988,900. Actual direct labor cost had been assigned to jobs as follows.

1. Determine the predetermined overhead rate for 2017.
2&3. Enter the overhead costs incurred and the amounts applied during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.
4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.

Determine the predetermined overhead rate for 2017.

nter the overhead costs incurred and the amounts applied during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.

Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.

Journal entry worksheet

Record entry to close underapplied /overapplied overhead.

Note: Enter debits before credits.

Movies completed and released $ 200,000 Movies still in production 50,000 Total actual direct labor cost $ 250,000

Explanation / Answer

Question - 2 & 3

Question - 4

Allocated between Cost of goods sold = 200,000 / 250,000 * 11,100 = 8880 and

50,000 / 250000 * 11100 = 2220

(1) Determine the Predetermined overhead rate of 2017 Numerator / Denominator = Overhead Rate Overhead Costs / Direct labor costs = Overhead rate 1,600,000 / 400,000 = 4

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