Compute the company’s predetermined overhead rate for the current year. 2. How much manufacturing overhead was applied to production during January? 3. Calculate the overapplied or underapplied overhead for January.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Midnight Sun Apparel Company uses normal costing, and manufacturing
to workin-process on the basis of machine hours. On January 1 of the current year, there were
no balances in work-in-process or finished-goods inventories. The following estimates were
included in the current year’s budget.
Total budgeted manufacturing overhead..................................................... $235,000
Total budgeted machine hours.................................................................... 47,000
During January, the firm began the following production jobs:
A79: 1,000 machine hours
N08: 2,500 machine hours
P82: 500 machine hours
During January, job numbers A79 and N08 were completed, and job number A79 was sold.
The actual manufacturing overhead incurred during January was $26,000.
Required:
1. Compute the company’s predetermined overhead rate for the current year.
2. How much manufacturing overhead was applied to production during January?
3. Calculate the overapplied or underapplied overhead for January.
4. Prepare a
Sold.
5. Prepare a journal entry to prorate the balance calculated in requirement (3) among the Work-
in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold accounts.
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