In December 2016, Custom Mfg. established its predetermined overhead rate for jo
ID: 2509934 • 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, $1,350,000, and direct materials costs, $500,000. At year-end 2017, the company's records show that actual overhead costs for the year are $1,440,000. Actual direct material cost had been assigned to jobs as follows Jobs completed and sold Jobs in finished goods inventory Jobs in work in process inventory Totalactual direct materials cost $390,000 84,000 56,000 $530,000 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 Complete this question by entering your answers in the tabs below Req 1 Req 2 and 3 Req 4 Determine the predetermined overhead rate for 2017 Overhead Rate Choose Numerator: Choose Denominator: Overhead Rate Overhead rateExplanation / Answer
Requirement 1 Overhead Rate Overhead cost / Direct materials costs = Overhead rate 1350000/500000 = 2.7 Requirement 2 Overhead rate Direct Materials cost Overhead cost incurred 1440000 Overhead cost applied 2.7 530000 1431000 Overhead is under applied by 9000 Requirement 3 Amount in $ Date General Journal Debit Credit Cost of goods sold 9000 Manufacturing overhead 9000