Problem: The following information pertains to Paramus Metal Works for the year just ended.
Budgeted direct labor cost: 77,000 hours at $17 an hour
Actual direct labor cost: 79,000 hours at $18 an hour
Budgeted manufacturing overhead: $993,300
Actual Manufacturing Overhead:
Depreciation $225,000
Property Taxes 19,000
Indirect Labor 79,000
Supervisory salaries 210,000
Utilities 58,000
Insurance 32,000
Rental of space 295,000
Indirect material (see data below) 79,000
Indirect Material:
Beginning inventory, Jan. 1 46,000
Purchases during the year 95,000
Ending inventory, Dec. 31 62,000
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.