Question:
The following information pertains to Paramus Metal Works for the year just ended.
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Budgeted direct-labor cost: 70,000 hours (practical capacity) at $16 per hour
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Actual direct-labor cost: 80,000 hours at $17.50 per hour
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Budgeted manufacturing overhead: $997,500
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Budgeted selling and administrative expenses: $438,000
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Actual manufacturing overhead:
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Depreciation
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$
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234,000
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Property taxes
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22,000
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Indirect labor
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81,000
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Supervisory salaries
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202,000
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Utilities
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58,000
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Insurance
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33,000
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Rental of space
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302,000
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Indirect material (see data below)
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79,000
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Indirect material:
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Beginning inventory, January 1
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47,000
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Purchases during the year
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95,000
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Ending inventory, December 31
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63,000
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Questions:
1. Compute the firm's predetermined overhead rate, which is based on direct-labor hours.
2. Calculate the over applied or under applied overhead for the year.
3. Prepare a journal entry to close out the Manufacturing Overhead account into Cost of Goods Sold.