Check Your Work ezto.mheducation.com/hm.tpx Luzadis Company makes furniture usin
ID: 2470718 • Letter: C
Question
Check Your Work ezto.mheducation.com/hm.tpx Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufac turing overhead cost to products on the basis of mac hine-hours The folowing estimates were used in preparing the predetermined overhead rate at the beginning of the year Fixed manufacturing overhead cost Variable manufacturing overhead per c 89.000 1,277,000 S 3.10 During the year a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year 50,000 934,000 Machine-hours Manufacturing overhead cost Inventories at year end 5 440,000 $ 180,000 1,030,000 2.740.000 Raw materials Work in process (includes overhead applied of 52.350 Finished goods (includes overhead applied of 174500) Cost of goods sold (includes overhead applied of 645,650) Required: Compute the company' places.) s predetermined overthead rate for the year (Round your answer to 2 decimal 17.45per hour 2 Compute the underapplied or overapplied overhead for the year (Round your intermediate calculations to 2 decimal places.) Urderappied overtual cost S 61.500 3 Assume the company closes any underapplied or overapplied overhead directly to Cost of Goods Sold Prepare the appropriate entry Qf no entry is required for a transaction/event, select "No journal entry required" in the first account Seld.Roand your intermediate calculations to 2 declmal 9000X Cost of goods sold 9000xExplanation / Answer
1
Calculation of Predetermined overhead rate:
Formula :
Predetermined overhead rate= Total Estimated Overhead / Total Machine hours
For Fixed Overhead = 1277000 /89000 = 14.35
For Variable Overhead = $3.10
Predetermined overhead rate= 14.35 + 3.10 = $17.45 Per Hour
2
Calculation of Under / over Applied overhead:
Applied Overhead = 50000 hours * $17.45 = $872500
Actual Overhead = $934000
Under Applied Overhead = 934000 - 872500 = $61500
3
Journal Entry to adjust the Under applied overhead:
Accounts Title / Explanations
Debit
Credit
Cost of Good sold
$61,500
Manufacturing Overhead
$61,500
(Being under applied overhead adjusted)
4
Journal Entry to adjust the Under applied overhead:
Work in process = 52350* 61500 / (52350+174500+645650) =
$ 3,690
Finished Goods = 174500* 61500 / (52350+174500+645650) =
$12,300
Cost of goods sold = 645650* 61500 / (52350+174500+645650) =
$45,510
Manufacturing Overhead
$61,500
(Being under applied overhead adjusted)
1
Calculation of Predetermined overhead rate:
Formula :
Predetermined overhead rate= Total Estimated Overhead / Total Machine hours
For Fixed Overhead = 1277000 /89000 = 14.35
For Variable Overhead = $3.10
Predetermined overhead rate= 14.35 + 3.10 = $17.45 Per Hour
2
Calculation of Under / over Applied overhead:
Applied Overhead = 50000 hours * $17.45 = $872500
Actual Overhead = $934000
Under Applied Overhead = 934000 - 872500 = $61500
3
Journal Entry to adjust the Under applied overhead:
Accounts Title / Explanations
Debit
Credit
Cost of Good sold
$61,500
Manufacturing Overhead
$61,500
(Being under applied overhead adjusted)
4
Journal Entry to adjust the Under applied overhead:
Work in process = 52350* 61500 / (52350+174500+645650) =
$ 3,690
Finished Goods = 174500* 61500 / (52350+174500+645650) =
$12,300
Cost of goods sold = 645650* 61500 / (52350+174500+645650) =
$45,510
Manufacturing Overhead
$61,500
(Being under applied overhead adjusted)