**Cost Flows; Applying Overhead**Erkens Company uses a job costing system with normal costing and applies factory overhead on the basis of machine hours. At the beginning of the year, management estimated that the company would incur $1,980,000 of factory overhead costs and use 66,000 machine hours.Erkens Company recorded the following events during the month of April:a. Purchased 180,000 pounds of materials on account; the cost was $5.00 per pound.b. Issued 120,000 pounds of materials to production, of which 15,000 pounds were used as indirect materials.c. Incurred direct labor costs of $240,000 and $40,000 of indirect labor costs.d. Recorded depreciation on equipment for the month, $75,700.e. Recorded insurance costs for the manufacturing property, $3,500.f. Paid $8,500 cash for utilities and other miscellaneous items for the manufacturing plant.g. Completed Job H11 costing $7,500 and Job G28 costing $77,000 during the month and transferred them to the Finished Goods Inventory account.h. Shipped Job G28 to the customer during the month. The job was invoiced at 35% above cost.i. Used 7,700 machine hours during April.**Required**1. Compute Erkens Company’s predetermined overhead rate for the year.2. Prepare journal entries to record the events that occurred during April.3. Compute the amount of overapplied or underapplied overhead and prepare a journal entry to close overapplied or underapplied overhead into Cost of Goods Sold on April 30.

The financial transactions are recorded initially in the form of journal entry.

Answered: Cost Flows; Applying Overhead Erkens…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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Cost Flows; Applying Overhead Erkens Company uses a job costing system with normal costing and applies factory overhead on the basis of machine hours. At the beginning of the year, management estimated that the company would incur $1,980,000 of factory overhead costs and use 66,000 machine hours.