In December 2010, Gomez Company’s manager estimated next year’s total direct lab
ID: 2513606 • 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
Req 1a: Estimated Overheads for the period 787950 Divide: Estimated labour hours 103000 Pre-determined OH rate 7.65 Req 1-b Overheads applied: Job No. Labour cost Rate /Hr Labour hours OH rate OH applied 201 355,000.00 15.00 23,666.67 7.65 181050 202 337,000 15 22,466.67 7.65 171870 203 172000 15 11,466.67 7.65 87720 204 419,000 15 27,933.33 7.65 213690 205 187000 15 12,466.67 7.65 95370 206 10900 15 726.67 7.65 5559 Overhead applied 755259 Req 2 Under/Over-applied overheads: Overheads applied 755259 Less: Overheads incurred 744559 Over-applied Jobs 10700 Req 3: Factory Overheads Dr. 10700 Cost of Goods sold 10700