Alternate problem E Sullivan Company applied overhead to production using a pred

Question

Alternate problem E Sullivan Company applied overhead to production using a predetermined overhead rate based on machine-hours. Budgeted data is: Budgeted machine-hours 75,000 Budgeted manufacturing overhead $870,000 a. Compute the predetermined overhead rate. b. Assume actual manufacturing overhead amounted to $997,500, and 86,000 machine-hours were used. Compute the amount of underapplied or overapplied manufacturing overhead and prepare the journal entry to transfer underapplied or overapplied overhead to Cost of Goods Sold.

Explanation / Answer

a) Predetermined overhead rate = budgeted MOH/Budgeted machine hours 870,000/75,000 11.6 per machine hours b) Applied manufacturing overhead    (11.6*86000)= 997600 Actual manufacturing overhead 997,500 Manufacturing overhead over applied 100 Accounting titles & explanations Debit Credit Manufacturing overhead 100 cost of goods sold 100

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