Part B a) Kennedy Company uses a job order costing system with overhead applied

Question

Part B a) Kennedy Company uses a job order costing system with overhead applied to units using a predetermined rate based on direct labor hours. At the beginning of the year, the company developed a predetermined rate with the following information: Budgeted drect labor cost Budgeted overhead Budgeted drect labor houLTS $10,000,000 40,000,000 400,000 At year-end, the company's overhead T account showed the following: Maufacturing Overhead 39,600000 42000,000 Required: a) Determine the actual direct labor hours incurred b) Record the journal entry applicable to the following transaction: During production a piece of inventory becomes broken. Additional rework to repair the inventory item requires direct material costing $620 and 10 hours of direct labor costing $140 (10 hours $14/hour). Assume that the spoilage is not due to the exacting nature of the job.

Explanation / Answer

Note:- as per guidline I have first question.

a) predetermined rate = Budgeted overhead/ Budgeted hour =$40,000,000/400,000 = $100 per direct labor hour Overhead applied (a) $42,000,000 Rate per hour(b) $100 Actual hours c= a/b 420000 hrs

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