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Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO P4 At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates: overhead costs, $1,040,000, and direct materials costs, $400,000.At year-end, the company reports that actual overhead costs for the year are $1,049,400. 1. Determine the predetermined overhead rate using estimated direct materials costs 2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year. 3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.

Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO P4 At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates: overhead costs, $1,040,000, and direct materials costs, $400,000.At year-end, the company reports that actual overhead costs for the year are $1,049,400. 1. Determine the predetermined overhead rate using estimated direct materials costs 2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year. 3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO P4 At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates: overhead costs, $1,040,000, and direct materials costs, $400,000.At year-end, the company reports that actual overhead costs for the year are $1,049,400. 1. Determine the predetermined overhead rate using estimated direct materials costs 2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year. 3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold. No Date General Journal Debit Credit < Required 2 Required 3 >
Transcribed Image Text:Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO P4 At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates: overhead costs, $1,040,000, and direct materials costs, $400,000.At year-end, the company reports that actual overhead costs for the year are $1,049,400. 1. Determine the predetermined overhead rate using estimated direct materials costs 2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year. 3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold. No Date General Journal Debit Credit < Required 2 Required 3 >
Expert Solution
Introduction :

Using estimated direct material costs ,

Predetermined overhead rate = Estimated manufacturing overhead / Estimated direct material costs

Over-applied / Under-applied factory overhead = Actual overhead cost - Applied overhead cost

If actual overhead > applied overhead , then Under-applied overhead

If applied overhead > actual overhead , then Over-applied overhead 

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