omputing Predetermined Overhead Rates and Job Costs [LO1 , LO2, LO3, LO7]
Kody Corporation uses a job-order costing system with a plantwide overhead rate based on machinehours.
At the beginning of the year, the company made the following estimates:
Machine-hours required to support estimated production .................... 150,000
Fixed manufacturing overhead cost ..................................................... $750,000
Variable manufacturing overhead cost per machine-hour .................... $4.00
Required:
1. Compute the predetermined overhead rate.
2. During the year Job 500 was started and completed. The following information was available with
respect to this job:
Direct materials requisitioned .............................. $350
Direct labor cost .................................................. $230
Machine-hours used ........................................... 30
Compute the total manufacturing cost assigned to Job 500.
3. During the year the company worked a total of 147,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,325,000. What is the amount of underapplied or overapplied overhead for the year? If this amount were closed out entirely to Cost of Goods Sold, would the journal entry increase or decrease net operating income?