Task:
The following information pertains to Trenton Glass Works for the year just ended.
Budgeted direct-labor cost: 70,000 hours (practical capacity) at $16 per hour
Actual direct-labor cost: 80,000 hours at $17.50 per hour
Budgeted manufacturing overhead: $997,500
Actual selling and administrative expenses: 432,000
Actual manufacturing overhead:
Depreciation $231,000
Property taxes 23,000
Indirect labor 81,000
Supervisory salaries 201,000
Utilities 58,000
Insurance 32,000
Rental of space 301,000
Indirect material (see data below) 80,000
Indirect material:
Beginning inventory, January 1 48,000
Purchases during the year 95,000
Ending inventory, December 31 63,000
Required to do:
1. Compute the firm's predetermined overhead rate, which is based on direct-labor hours.
2. Calculate the overapplied or underapplied overhead for the year.
3. Prepare a journal entry to close out the Manufacturing Overhead account into Cost of Goods Sold.