In December 2010, Gomez Company’s manager estimated next year’s total direct lab
ID: 2513592 • Letter: I
Question
In December 2010, Gomez Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,060 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.
At the end of 2011, records show the company incurred $744,559 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $355,000; Job 202, $337,000; Job 203, $172,000; Job 204, $419,000; and Job 205, $187,000. In addition, Job 206 is in process at the end of 2011 and had been charged $10,900 for direct labor. No jobs were in process at the end of 2010. The company’s predetermined overhead rate is based on direct labor cost.
Determine the predetermined overhead rate for year 2011. (Omit the "%" sign in your response.)
Determine the total overhead cost applied to each of the six jobs during year 2011. (Omit the "$" sign in your response.)
Determine the over- or underapplied overhead at year-end 2011. (Input all amounts as positive values.Omit the "$" sign in your response.)
Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of year 2011. (Omit the "$" sign in your response.)
In December 2010, Gomez Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,060 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.
Explanation / Answer
Answer:
1
The predetermined overhead rate for year 2011
=Estimated overhead cost / direct labor Cost
=787,950 / (50*15*2060)
=51%
______________________________
2
Job No
Direct
labor
Applied
FOH 51%
A
A*51%
201
355000
181050
202
337000
171870
203
172000
87720
204
419000
213690
205
187000
95370
206
10900
5559
Total
1480900
755259
________________________________________
3
the over- or underapplied overhead at year-end 2011
Actual Overhead cost
787950
Less: Overhead applied
755259
Underappled Overhead
32691
______________________________________
4
Date
Description
Debit $
Credit $
31-Dec
Cost of goods sold
32691
Factory Overhead
32691
Job No
Direct
labor
Applied
FOH 51%
A
A*51%
201
355000
181050
202
337000
171870
203
172000
87720
204
419000
213690
205
187000
95370
206
10900
5559
Total
1480900
755259