Harwood Company uses a job-order costing system that applies overhead cost to jo

Question

Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.60 per machine-hour was based on a cost formula that estimates $213,200 of total manufacturing overhead for an estimated activity level of 82,000 machine-hours Required 1. Assume that during the year the company works only 77,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts 2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account. 2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold Complete this question by entering your answers in the tabs below Req 1 Req 2A Req 2B Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts Manufacturing Overhead 23,000 8,200 75,000 34,000 7,200 Work in Process 730,000 92,000 (Maintenance) (Indirect materials) (Indirect labor) (Utilities) (Insurance) (Direct materials) (Direct labor) (Overhead) (a)

Explanation / Answer

1. Amount of overhead cost applied to Work-in-progress = No. of machine hours*Predetermined overhead rate = 77,000*2.6 = $200,200

$200,200 will be added to Manufacturing overhead in credit and debit to Work-in-progress.

2A.

Total cost applied = 23000+8200+75000+34000+7200 = 147,400

Underapplied overhead = 200,200 - 147,400 = $52,800

2B.

Journal entry:

Cost of goods sold                               52,800

            Manufacturing overhead                          52,800

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