ARKANSAS CORPORATION …… is a company that produces machinery to customer order. Its job costing system, using normal costing, has two direct cost categories, direct materials and direct labor, and one indirect cost pool, manufacturing overhead, allocated using a budgeted rate based on direct labor costs. Budgeted and actual information for 2016 are as follows: Budget Actual Direct Labor $420,000 $400,000 Manufacturing overhead $252,000 $186,840 At the end of 2016, the ending work in process consisted of: Ending Work In Process: Direct Materials $64,000 Direct Labor 50,000 Overhead 30,000 $144,000 There were no beginning work-in-process or finished-goods inventories. Ending Finished Goods showed a balance of $156,000, which included overhead costs of $25,200. Cost of goods sold was $1,600,000, of which $184,800 consisted of applied overhead. Required: What is the predetermined overhead rate (per direct labor dollar)? How much overhead was applied to production during 2016? What was the journal entry to record this? What were the journal entries to record actual overhead in 2016? Calculate the under/overapplied overhead for 2016

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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ARKANSAS CORPORATION

…… is a company that produces machinery to customer order. Its job costing system, using normal costing, has two direct cost categories, direct materials and direct labor, and one indirect cost pool, manufacturing overhead, allocated using a budgeted rate based on direct labor costs. Budgeted and actual information for 2016 are as follows:


			Budget	Actual

Direct Labor		$420,000	$400,000
Manufacturing overhead	$252,000	$186,840

At the end of 2016, the ending work in process consisted of:

Ending Work In Process:
Direct Materials	$64,000
Direct Labor	50,000
Overhead	30,000
		$144,000

There were no beginning work-in-process or finished-goods inventories. Ending Finished Goods showed a balance of $156,000, which included overhead costs of $25,200.

Cost of goods sold was $1,600,000, of which $184,800 consisted of applied overhead.

Required:

What is the predetermined overhead rate (per direct labor dollar)?

How much overhead was applied to production during 2016? What was the journal entry to record this?

What were the journal entries to record actual overhead in 2016?

Calculate the under/overapplied overhead for 2016

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