Calculate and Use Overhead Rate Selected data for the consulting department of K

Question

Calculate and Use Overhead Rate Selected data for the consulting department of Kingman Consulting, Inc., follow: Estimated consulting overhead cost for the year $1,215,000 Estimated direct labor cost for the year (@ $9/hr.) 810,000 Actual manufacturing overhead cost for May 78,000 Actual direct labor cost for May (2,400 hours) Assuming that direct labor cost is the basis for applying consulting overhead a. Calculate the predetermined overhead rate. 66,000 0 6 b. Prepare a journal entry that applies consulting overhead for May. General Journal Description Debit Credit c. By what amount is consulting overhead over- or underapplied in May? Consulting overhead was by $0 in May. Check

Explanation / Answer

Answer

a.

Predetermined overhead rate = Estimated consulting overhead / Estimated Direct Labor Cost

= $1,215,000 / $810,000

Predetermined overhead rate = 150%

b.

Work-in-progress inventory (Dr.) 99,000 (66,000 * 150%)

Consulting Overhead (Cr.) 99,000

c.

Overapplied = Estimated - Actual

Overapplied by $21,000 (99,000 – 78,000)

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