Problem
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March-Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Estimated total fixed manufacturing overhead $ 14,500
Estimated variable manufacturing overhead per direct labor-hour $ 1.90
Estimated total direct labor-hours to be worked 2,900
Total actual manufacturing overhead costs incurred $ 18,000
|
Job P
|
Job Q
|
|
Direct materials
|
$
|
18,500
|
$
|
8,900
|
|
Direct labor cost
|
$
|
40,000
|
$
|
10,000
|
|
Actual direct labor-hours worked
|
|
2,000
|
|
500
|
1. What is the amount of underapplied or overapplied overhead?
2. Prepare the journal entry to close the amount of underapplied or overapplied overhead to Cost of Goods Sold.
3. Assume that Job P includes 25 units that each sell for $3,500 and that the company's selling and administrative expenses in March were $10,000. Prepare an absorption costing income statement for March.