At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $1,350,000, and direct materials costs, $500,000. At year-end, the company’s records show that actual overhead costs for the year are $1,470,500. Actual direct materials cost had been assigned to jobs as follows.          Jobs completed and sold $ 400,000   Jobs in finished goods inventory   82,000   Jobs in work in process inventory   59,000   Total actual direct materials cost $ 541,000     1. Determine the predetermined overhead rate.2&3. Enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $1,350,000, and direct materials costs, $500,000. At year-end, the company’s records show that actual overhead costs for the year are $1,470,500. Actual direct materials cost had been assigned to jobs as follows.
 

       
Jobs completed and sold $ 400,000  
Jobs in finished goods inventory   82,000  
Jobs in work in process inventory   59,000  
Total actual direct materials cost $ 541,000  
 


1. Determine the predetermined overhead rate.
2&3. Enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.
4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.

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