Chapter 16: The predetermined overhead allocation rate for Decker Co. is based o

Question

Chapter 16: The predetermined overhead allocation rate for Decker Co. is based on estimated direct labor costs of $385,000 and estimated factory overhead of $519,750. Actual costs incurred were: Direct materials Direct labor Indirect materials Indirect labor Sales commissions Factory depreciation Property taxes, factory Factory utilities Advertising Factory equipment rental $315,000 463,500 49,800 116,750 40,000 166,000 18,500 28,500 87,250 99,400 A) Calculate the predetermined overhead rate. B) Prepare the journal entry to apply factory overhead for the month. C) Determine the amount of over- or underapplied overhead and prepare the journal entry to adjust the over-or underapplied overhead.

Explanation / Answer

a) Predetermined Overhead Rate :-

= (Estimated Direct Labor / Estimated Factory Overhead)*100

= ($519750 / $385000)*100

= 135%

b) journal Entry :-

c) Amount of Over or Underapplied Overhead :-

= Applied Overhead - Actual Overhead

= $519750 - $478950

= $40800 Overapplied

Journal Entry :-

Particulars Debit($) Credit($) Work in Process Inventory A/c Dr. 478950 To Indirect Materials A/c 49800 To Indirect Labor A/c 116750 To Factory Depreciation A/c 166000 To Property Taxes, Factory A/c 18500 To Factory Utilities A/c 28500 To Factory Equipment Rental 99400

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