Hartley uniforms produces uniforms. produces uniforms. The company allocates man
ID: 2604984 • Letter: H
Question
Hartley uniforms produces uniforms.
produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses.
Hartley UniformsHartley Uniforms
reports the following cost data for the past year:
LOADING...
(Click the icon to view the cost data.)Read the requirements
LOADING...
.
Requirement 1. Compute the predetermined manufacturing overhead rate.
Enter the formula for predetermined manufacturing overhead rate, then compute the rate.
Estimated yearly overhead costs
/
Estimated yearly machine hours
=
Predetermined overhead rate
$194,400
/
7,200
=
$27
per machine hour
Requirement 2. Calculate the allocated manufacturing overhead for the past year.
Manufacturing
Actual machine hours
x
Predetermined overhead rate
=
overhead allocated
6,300
x
$27
=
$170,100
Requirement 3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of?
First calculate the preliminary manufacturing overhead balance using the T-account.
Manufacturing Overhead
Actual indirect materials
50,500
Manufacturing overhead allocated
170,100
Actual indirect manufacturing labor
42,000
Actual depreciation on plant and equipment
72,500
Actual plant utilities
38,400
End Bal
33,300
Close the under- or overallocated overhead to Cost of Goods Sold by journalizing the entry. (Record debits first, then credits. Exclude explanations from any journal entries.)
Journal Entry
Date
Accounts
Debit
Credit
DATA TABLE
Budget
Actual
Direct labor hours. . . . . . . . . . . . . . . . . . . . . . . .
7,600
hours
6,100
hours
Machine hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,200
hours
6,300
hours
Depreciation on salespeople's autos. . . . . . . . . . . .
$23,000
$23,000
Indirect materials. . . . . . . . . . . . . . . . . . . . . . . .
$48,500
$50,500
Depreciation on trucks used to deliver uniforms
to customers. . . . . . . . . . . . . . . . . . . . . . . . . .
$13,000
$11,000
Depreciation on plant and equipment. . . . . . . . . .
$70,000
$72,500
Indirect manufacturing labor. . . . . . . . . . . . . . . . .
$40,000
$42,000
Customer service hotline. . . . . . . . . . . . . . . . . . . . . .
$19,000
$21,000
Plant utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$35,900
$38,400
Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$72,500
$85,500
Estimated yearly overhead costs
/
Estimated yearly machine hours
=
Predetermined overhead rate
Explanation / Answer
Solution:
Requirement 1. Compute the predetermined manufacturing overhead rate --- It is calculated correctly in the question. However I can provide you the explanation if needed, please let me know.
Requirement 2. Calculate the allocated manufacturing overhead for the past year --- This part is also done correctly. However I can provide you the explanation if needed, please let me know.
Requirement 3
Calculation of under or over allocated manufacturing overhead
Manufacturing Overhead expenses are usually applied to production on the basis of pre-determined rates.
Over-applied Overheads ----- If Applied Manufacturing Overheads are higher than the actual overheads incurred, the difference is called Over Applied Overhead.
Under-applied Overheads ----- If Applied Manufacturing Overheads are lesser than the actual overheads incurred, the difference is called Under Applied Overhead.
Here in the question,
Applied Manufacturing Overheads (as calculated in Requirement 2) = $170,100
Actual Manufacturing Overheads Incurred (as per T Account) = $50,500 + $42,000 + $72,500 + $38,400 = $203,400
It means Applied Manufacturing Overheads are lesser than Actual overheads. Hence Overheads are under-applied.
Under Applied Overhead = Actual Manufacturing Overheads – Applied Manufacturing Overheads
= $203,400 - $170,100
= $33,300
Disposition of Under Applied Overheads
Generally, Over or Under Applied Overheads are disposed off to Cost of Goods Sold.
General Journal
Debit
Credit
Cost of Goods Sold
$33,300
Under-Applied Manufacturing Overhead
or
Manufacturing Overhead Account
$33,300
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
General Journal
Debit
Credit
Cost of Goods Sold
$33,300
Under-Applied Manufacturing Overhead
or
Manufacturing Overhead Account
$33,300
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.