Cayman Custom Manufacturing Company applies manufacturing overhead on the basis
ID: 2362738 • Letter: C
Question
Cayman Custom Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $300,000 and machine hours to be 15,000. Actual manufacturing overhead and machine hours were $340,000 and 16,000, respectively.
Prepare the journal entries to record actual and applied manufacturing overhead. (Omit the "$" sign in your response.)
Requirement 5:
Compute the predetermined overhead rate. (Omit the "$" sign in your response.)
Explanation / Answer
Cayman Custom Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $300,000 and machine hours to be 15,000. Actual manufacturing overhead and machine hours were $340,000 and 16,000, respectively.
Requirement 1:
Prepare the journal entries to record actual and applied manufacturing overhead.
Manufacturing Overhead $340,000
Cash or Payables $340,000
Predetermined overhead rate = $300,000 / 15,000 = $20 per machine hour
Requirement 2:
Compute applied manufacturing overhead. Applied manufacturing overhead = 16,000 x $20 = $320,000
Requirement 3:
Prepare the journal entries to record actual and applied manufacturing overhead.
Manufacturing Overhead $340,000
Cash or Payables $340,000
Manufacturing Overhead $320,000
Requirement 4: Compute over- or underapplied manufacturing overhead. Under applied manufacturing overhead $20,000 ($340,000 - $320,000)
Requirement 5: Prepare the journal entry to transfer the overhead balance to Cost of Goods
Cost of Goods Sold $20,000
Manufacturing Overhead $20,000
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