Mastercraft Incorporated has decided to use a predetermined rate to assign manufacturing overhead to production. The following predictions have been made for 2014:
Predicted total factory overhead costs $150,000
Predicted direct labor hours 40,000 hours
Predicted direct labor costs $200,000
Predicted machine hours 60,000 hours
Questions:
1. Compute the predetermined manufacturing overhead rate under 3 different bases: 1) direct labor hours, 2) direct labor costs, and 3) machine hours. (Round amounts to 2 decimal places).
2. Assume that actual manufacturing overhead was $152,500 and Mastercraft Incorporated elected to apply manufacturing overhead to Work in Process based on direct labor hours. If actual labor was 42,000 hours for 2014, was factory overhead overapplied or underapplied? By how much? Give the journal entry to record the application of overhead.
3. Mastercraft Incorporated follows the policy of writing off any under or overapplied manufacturing overhead balance to Cost of Goods Sold at the end of the year. Give the journal entry necessary at the end of 2014 to dispose of the manufacturing overhead balance determined in Part (2).