1. Trendy Manufacturing uses normal costing based on a job-order costing system. Indirect costs are allocated to jobs using a plantwide overhead rate based on machine hours. At the beginning of 2014, the company made the following estimates:
Machine-hours required to support estimated production200,000
Fixed manufacturing overhead cost$950,000
Variable manufacturing overhead cost per machine-hour$7.00
Required:
a. Compute the predetermined overhead rate.
b. During 2014, Job 450 was started and completed. The following information was available with respect to this job:
Direct materials requisitioned$400
Direct labor cost$270
Machine-hours used45
Compute the total manufacturing cost assigned to Job 450.
2. During the year, the company worked a total of 189,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $2,200,750. 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?