In December 2016, Custom Mfg. established its predetermined overhead rate for jo
ID: 2429979 • Letter: I
Question
In December 2016, Custom Mfg. established its predetermined overhead rate for jobs produced during 2017 by using the following cost predictions: overhead costs, $880,000, and direct materials costs, $400,000. At year-end 2017, the company's records show that actual overhead costs for the year are $1,127,300. Actual direct material cost had been assigned to jobs as follows Jobs completed and sold Jobs in finished goods inventory obs in work in process inventory Total actual direct materials cost $390,000 71,000 47,000 $508,000 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.Explanation / Answer
Overhead rate Choose Numerator / Choose Denominator = Overhead rate Estimated overhead rate / Estimated direct material cost = Overhead rate 880,000 / 400,000 = 2.2 Factory overhead Actual overhead 1,127,300 Applied overhead 1117600 underapplied overhead 9,700 Date General Journal Debit Credit 31-Dec cost of goods sold 9,700 Factory overhead 9,700