Mackenzie Company has decided to use a predetermined rate to assign following pr

Question

Mackenzie Company has decided to use a predetermined rate to assign following predictions have been made for 2018 factory overhead to production. The Estimate total factory overhead costs $240,000 Estimate direct labor hours Estimate direct labor costs Estimate machine hours 20,000 DLH 60,000 MH 19,000 DLH 61,000 MH $200,000 Actual direct labor hours Actual direct labor costs Actual machine hours $208,000 Required: a. Compute the predetermi b. Assume that actual factory overhead was $253,000 and that Mackenzie Company elected to apply factory ined factory overhead rate under three different bases: (1) direct labor hours, (2) direct labor costs, and (3) machine hours. (Round amounts to 2 decimal places,) overhead to Work in Process based on direct labor costs. i. Was factory overhead or 2018 over-or under-applied? How muc ii. Give the journal entry to record the application of overhead. to Cost of Goods Sold at the end of the year. Give the journal entry necessary h? c. Mackenzie Company follows the policy of writing off any under-or over-applied Factory at the end of 2018 to dispose of the Factory Overhead balance determined in Part (b).

Explanation / Answer

a) Predetermine overhead rate :

b) under or over applied overhead = (208000*120%)-253000 = 3400 under applied overhead

Journal entry :

c) Journal entry :

Direct labour hour (240000/20000) 12 per DLH Direct labour cost (240000*100/200000) 120% of direct labour cost Machine hour (240000/60000) 4 per MH

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