Chapter 03 Problems Ouestion 4 fof 5) Save & E 25.00 points Luzadis Company make

Question

Chapter 03 Problems Ouestion 4 fof 5) Save & E 25.00 points Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: 1.273,000 During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Manufacturing overhead cost Inventories at year-end: 990.000 Raw materials Work in process (includes overhead Finished goods (includes overhead Cost of goods sold (includes overhead $ 430,000 150,000 1030.000 applied of 54,990) applied of 256,620) 5 2.760.000 applied of 604,890) Required Compute the company's predetermined overhead rate for the year, Round your answer to 2 decimal places.) per hour 2 Compute the underapplied or overapplied overhead for the year (Round your intermediate calculations to 2 decimal places.)

Explanation / Answer

As per policy, only four parts of the question is allowed to answer, so answering 1-4 :

1. Pre-determined overhead rate : Fixed manufacturing overhead cost / Machine hours = 1273000/87000 = $14.63 per machine hour used.

2. Under applied or Over applied overhead for the year = Actual overhead $990000 – overhead applied [50000* (3.70+14.63)] = under-applied overhead $73500

3. Journal Entry for closing the underapplied to COGS :

Debit           Cost of Goods Sold                 $73500

Credit          Manufacturing overhead                     $73500

4) Journal entry if the under-applied overhead is allocated to WIP, FG & COGS :

Debit            Work in process                               $4406

Debit            Finished Goods                                $20560

Debit            COGS                                                 $48464

Credit           Manufacturing overhead                            $73500

(value of assets * under-applied overhead / total value of all current assets)

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