Duggan Company applies manufacturing overhead to jobs on the basis of machine ho

Question

Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $307,900 for the year, and machine usage is estimated at 125,200 hours. For the year, $330,887 of overhead costs are incurred and 132,900 hours are used.

1) Compute the manufacturing overhead rate for the year. (Round answer to 3 decimal places, e.g. 2.250.)
2) What is the amount of under- or overapplied overhead at December 31? (Round answer to 0 decimal places, e.g. 12,500.)
3) Assuming the under- or overapplied overhead for the year is not allocated to inventory accounts, prepare the adjusting entry to assign the amount to cost of goods sold.

Explanation / Answer

1) Compute the manufacturing overhead rate for the year. Predetermined OH Rate = Budgeted OH/Budegetd MC Hrs = $307,900/125,200 = $2.459 2) What is the amount of under- or overapplied overhead at December 31? So For 132,900 Hrs, Appld OH will be 132900*$2.459 = $326,801 Actual OHs is $330,887 which is More than Appld OH $326,801 So OHs are Overapplied by $330,887- $326,801= $4,086 3) Assuming the under- or overapplied overhead for the year is not allocated to inventory accounts, prepare the adjusting entry to assign the amount to cost of goods sold. 31 Decyy Mfg OH Dr 4086 COGS Cr 4086

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