Renteria Company applies manufacturing overhead to jobs on the basis of machine
ID: 2434797 • Letter: R
Question
Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hourse.For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
a.) Compute the manufacturing overhead rate for the year.
b.) What is the amount of under- or overapplied overhead at December 31?
c.) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Explanation / Answer
a.) Compute the manufacturing overhead rate for the year. Budget overhead = $305,000 Budgeted Hours = 125,000 Overhead rate per hour = 305,000 ÷ 125,000 =$2.44 b.) What is the amount of under /over applied overhead at December 31? Overhead Applied = Actual Hours x Overhead rate = 130,000 x 2.44 = $317,200 Actual Overhead = $322,000 Overhead under applied = $322,000 - $317,200 = $4,800 c.) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold. Cost of goods sold $4,800 Manufacturing overhead $4,800