Exercise 3-9 Applying Overhead; T-accounts; Journal Entries (LO3-1, LO3-2, LO3-4J Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.80 per machine-hour was based on a cost formula that estimates $232,400 of total manufacturing overhead for an estimated activity level of 83,000 machine-hours. Required: 1. Assume that during the year the company works only 78,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts. 2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account. 2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![Exercise 3-9 Applying Overhead; T-accounts; Journal Entries (LO3-1, LO3-2, LO3-4]
Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's
predetermined overhead rate of $2.80 per machine-hour was based on a cost formula that estimates $232,400 of total manufacturing
overhead for an estimated activity level of 83,000 machine-hours.
Required:
1. Assume that during the year the company works only 78,000 machine-hours and incurs the following costs in the Manufacturing
Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year
and make the entry in your T-accounts.
2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing
Overhead T-account.
2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F49135e95-a06f-4e27-9f09-cfe790cb58be%2Fab6c591c-ae02-4488-bb30-aa68b9aceb7f%2F6mg1k41_processed.jpeg&w=3840&q=75)
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