At the beginning of the year, Learer Company’s manager estimated total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager also estimated the following manufacturing overhead costs for the year. Indirect labor $ 319,200 Factory supervision 240,000 Rent on factory building 140,000 Factory utilities . 88,000 Factory insurance expired . 68,000 Depreciation—Factory equipment . 480,000 Repairs expense—Factory equipment 60,000 Factory supplies used . 68,800 Miscellaneous production costs . 36,000 Total estimated overhead costs $1,500,000 At year-end, records show the company incurred $1,520,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $604,000; Job 202, $563,000; Job 203, $298,000; Job 204, $716,000; and Job 205, $314,000. In addition, Job 206 is in process at the end of the year and had been charged $17,000 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 following. a. Predetermined overhead rate for the year. b. Total overhead cost applied to each of the six jobs during the year. c. Over- or underapplied overhead at year-end. 2. 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.
At the beginning of the year, Learer Company’s manager estimated total direct labor cost assuming
50 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager
also estimated the following
Indirect labor $ 319,200
Factory supervision 240,000
Rent on factory building 140,000
Factory utilities . 88,000
Factory insurance expired . 68,000
Repairs expense—Factory equipment 60,000
Factory supplies used . 68,800
Miscellaneous production costs . 36,000
Total estimated overhead costs $1,500,000
At year-end, records show the company incurred $1,520,000 of actual overhead costs. It completed and
sold five jobs with the following direct labor costs: Job 201, $604,000; Job 202, $563,000; Job 203,
$298,000; Job 204, $716,000; and Job 205, $314,000. In addition, Job 206 is in process at the end of the
year and had been charged $17,000 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 following.
a. Predetermined overhead rate for the year.
b. Total overhead cost applied to each of the six jobs during the year.
c. Over- or underapplied overhead at year-end.
2. Assuming that any over- or underapplied overhead is not material, prepare the
any over- or underapplied overhead to Cost of Goods Sold at the end of the year.
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