Compute the amount of overhead cost that would be applied to Work in Process for

Question

Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts.

Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.60 per machine-hour was based on a cost formula that estimates $228,800 of total manufacturing overhead for an estimated activity level of 88,000 machine-hours.

Required:

1. Assume that during the year the company works only 83,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts.

2.Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account from Req 1

3.Record the entry to close the balance of the manufacturing overhead account to COGS account.

Explanation / Answer

1) Applied overhead = 2.6*83000 = $215800

2) Under applied overhead = 221600-215800 = $5800

3) Journal entry :

Manufacturing Overhead Work in Process (Maintenance) 29,000 Work in process (a)83000*2.6 = 215800 (Direct materials) 790,000 (Indirect materials) 8,800 (Direct labor) 98,000 (Indirect labor) 72,000 (Overhead) (a) 215800 (Utilities) 40,000 (Insurance) 7,800 (Depreciation) 64,000 Total 221,600 Balance 5800

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