At the beginning of the year, Learer Company’s manager estimated total direct labor cost assuming 30 persons working an average of 2,000 hours each at an average wage rate of $40 per hour. The manager also estimated the following manufacturing overhead costs for the year.           Indirect labor $ 334,200   Factory supervision   143,000   Rent on factory building   155,000   Factory utilities   103,000   Factory insurance expired   83,000   Depreciation—Factory equipment   412,000   Repairs expense—Factory equipment   75,000   Factory supplies used   83,800   Miscellaneous production costs   51,000   Total estimated overhead costs $ 1,440,000     At year-end, records show the company incurred $1,592,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $619,000; Job 202, $578,000; Job 203, $313,000; Job 204, $731,000; and Job 205, $329,000. In addition, Job 206 is in process at the end of the year and had been charged $32,000 for direct labor. No jobs were in process at the beginning of the year. The company’s predetermined overhead rate is based on direct labor cost.   Required 1. Determine the predetermined overhead rate for the year. 2. Determine the total overhead cost applied to each of the six jobs during the year. 3. Determine the over-or underapplied overhead at the year-end. 4. Assuming that any over-or underapplied overhead is not material, prepare the adjusting entry to allocate any over-or underapplied overhead to Cost of Goods Sold at the end of  the year.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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At the beginning of the year, Learer Company’s manager estimated total direct labor cost assuming 30 persons working an average of 2,000 hours each at an average wage rate of $40 per hour. The manager also estimated the following manufacturing overhead costs for the year.
 

       
Indirect labor $ 334,200  
Factory supervision   143,000  
Rent on factory building   155,000  
Factory utilities   103,000  
Factory insurance expired   83,000  
Depreciation—Factory equipment   412,000  
Repairs expense—Factory equipment   75,000  
Factory supplies used   83,800  
Miscellaneous production costs   51,000  
Total estimated overhead costs $ 1,440,000  
 


At year-end, records show the company incurred $1,592,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $619,000; Job 202, $578,000; Job 203, $313,000; Job 204, $731,000; and Job 205, $329,000. In addition, Job 206 is in process at the end of the year and had been charged $32,000 for direct labor. No jobs were in process at the beginning of the year. The company’s predetermined overhead rate is based on direct labor cost.
 
Required
1.
 Determine the predetermined overhead rate for the year.
2. Determine the total overhead cost applied to each of the six jobs during the year.
3. Determine the over-or underapplied overhead at the year-end.
4. Assuming that any over-or underapplied overhead is not material, prepare the adjusting entry to allocate any over-or underapplied overhead to Cost of Goods Sold at the end of  the year.

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