In December 2010, Gomez Company’s manager estimated next year’s total direct lab
ID: 2513685 • 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 2,020 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 $723,096 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $348,000; Job 202, $324,000; Job 203, $167,000; Job 204, $416,000; and Job 205, $174,000. In addition, Job 206 is in process at the end of 2011 and had been charged $10,600 for direct labor. No jobs were in process at the end of 2010. The company’s predetermined overhead rate is based on direct labor cost.
Determine the predetermined overhead rate for year 2011. (Omit the "%" sign in your response.)
Determine the total overhead cost applied to each of the six jobs during year 2011. (Omit the "$" 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 2,020 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
1-a. Predetermined overhead rate Total direct labor cost 50*2020*15= 1515000 Total Estimated OH costs 772650 So, Predetermined overhead rate= Total Estimated OH/Total Direct labor cost 772650/1515000= 0.51 1b. Total overhead cost applied to each of the six jobs during year 2011. Job No. Direct labor costs Applied Overhead at 0.51*Dl cost 201 348000 177480 202 324000 165240 203 167000 85170 204 416000 212160 205 174000 88740 206 10600 5406 Total 1439600 734196 1c. Over -applied overhead (applied OH is gretaer than Oh incurred) at year-end 2011---- Actual OH incurred- OH applied=723096-734196= 11100 2...Date Debit Credit Dec. 31 Factory overhead 11100 Cost of goods sold 11100 (over-applied OH credited to COGS)