E20-5 Ikerd Company applies manufacturing overhead to jobs on the basis of machi
ID: 2576958 • Letter: E
Question
E20-5 Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $300,000 for the year, and machine usage is estimated at 125,000 hours.
For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
Instructions
. (a) Compute the manufacturing overhead rate for the year.
. (b) What is the amount of under- or overapplied overhead at December 31?
. (c) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Explanation / Answer
Manufacturing Overhead Rate = Standard Ovverhead / Standard Hours
= 300000 / 125000
= 2.4 per hour
Overhead Applied = standard rate x actual hours
= 2.4 x 130000
= 312000
Actual Overhead = 322000
Actual Overhead > Overhead applied , therefore this is case of under applied overhead.
Entry to record under application (322000-312000)
Particulars Debit Credit Cost of Goods Sold 10000 Manufacturing Overhead Control 10000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.