Recording overhead costs in T-accounts Tescott Company and Heizer Company both a
ID: 2411403 • Letter: R
Question
Recording overhead costs in T-accounts Tescott Company and Heizer Company both apply overhead to the Work in Process Inventory account using direct labor hours. The following information is available for both companies for the year: Tescott Company Heizer Company Actual manufacturing overhead Actual direct labor hours Underapplied overhead Overapplied overhead $320,000 20,000 $600,000 24,000 24,000 $48,000 Required a. Compute the predetermined overhead rate for each company. b. Using T-accounts, record the entry to close the overapplied or underapplied overhead at the end of the accounting period for each company, assuming the amounts are immaterial.Explanation / Answer
Answer- A:
Actual Direct Labour Hours * Pre-determined Overhead Rate = Applied Overhead
Pre-determined Overhead Rate = Applied Overhead / Actual Direct Labour Hours
For Tescott Company:
= (320,000 + 48,000) / 20,000 = $ 18.40 per direct labour hour
For Heizer Company:
= (600,000 – 24000) / 24000 = $ 24 per direct labour hour
Answer-B:
For Tescott Company:
Date
Accounts Title and Explanation
Debit
Credit
a)
Work in Process Inventory
368000
Manufacturing Overhead
368000
(To record the applied overhead)
b)
Manufacturing Overhead
48000
Work in Process Inventory
48000
(To close the overapplied overheads)
Work in Process Inventory
Manufacturing Overhead
368000
Manufacturing O/H (Over applied)
48000
For Heizer Company:
Date
Accounts Title and Explanation
Debit
Credit
a)
Work in Process Inventory
576000
Manufacturing Overhead
576000
(To record the applied overhead)
b)
Work in Process Inventory
24000
Manufacturing Overhead
24000
(To close the over applied overheads)
Work in Process Inventory
Manufacturing Overhead
576000
Manufacturing O/H (Under applied)
24000
Date
Accounts Title and Explanation
Debit
Credit
a)
Work in Process Inventory
368000
Manufacturing Overhead
368000
(To record the applied overhead)
b)
Manufacturing Overhead
48000
Work in Process Inventory
48000
(To close the overapplied overheads)
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