Burlington Brewery LTD. uses direct labor hours (DLH) in its predetermined overh

Question

Burlington Brewery LTD. uses direct labor hours (DLH) in its predetermined overhead rate. At the end of the year, the actual labor hours (DLH) were 3,440 hours and the total actual manufacturing overhead was $147,360.

At the beginning of the year, estimated direct labor hours (DLH) for the year were 3,850 hours and the estimated manufacturing overhead for the year was $140,525.

Calculate the Manufacturing Overhead balance at the end of the year and the journal entry to clear this amount if necessary, also indicate if it is under or over applied

ESTIMATED MO $140,525 ESTIMATED DLH 3,850 POR ACTUAL DLH 3,440 APPLIED MO ACTUAL OVERHEAD $147,360 APPLIED OVERHEAD UNDERAPLLIED OVERHEAD JOURNAL ENTRY

Explanation / Answer

Estimated MO 140525 Estimated DLH 3850 POR 36.5 Actual DLH 3440 Applied MO ( 3440 * 36.5) 125560 Actual overhead 147360 Applied overhead 125560 Underapplied overhead 21800 Journal entry Cost of goods sold Dr 21800              Manufacturing overhead Cr 21800 ( To record overhead underapplied now cleared)

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