### Determining Under- or Overapplied Overhead#### Analyzing Manufacturing OverheadOn December 31st, you are asked to determine the amount of under- or overapplied overhead for the year. The image shows the following elements:1. **Prompt:** - "What is the amount of under- or overapplied overhead at December 31?"2. **Input Fields and Selections:** - **Manufacturing Overhead:** A text field to enter the dollar amount of the manufacturing overhead. In this example, the amount entered is $254,800. - **Underapplied/Overapplied Dropdown:** A dropdown menu to specify whether the overhead is underapplied or overapplied. In this case, "Underapplied" is selected.3. **System Feedback:** - A message above the prompt stating, "Your answer is partially correct."#### Explanation- **Manufacturing Overhead ($254,800):** This field represents the total overhead costs incurred by the manufacturing process which needs to be analyzed.- **Underapplied/Overapplied:** This option allows the user to classify whether the analyzed overhead is less than (underapplied) or more than (overapplied) what was estimated at the beginning of the period.### Understanding Overhead ApplicationIn manufacturing, overhead expenses like indirect materials, labor, and other costs are estimated at the beginning of the period. At the end of the period, actual costs are compared to the estimated amounts to determine if they are underapplied or overapplied:- **Underapplied Overhead:** When the actual overhead costs are higher than the estimated amount.- **Overapplied Overhead:** When the actual overhead costs are lower than the estimated amount.In this scenario, with $254,800 identified as underapplied, it means the actual costs were $254,800 more than initially estimated, indicating an adjustment might be necessary for accurate financial reporting.#### Educational NoteUnderstanding this concept is crucial for accounting students and professionals as it impacts the accuracy of financial statements and helps in making informed financial decisions. Proper adjustment of under- or overapplied overhead ensures that a company's product cost calculations are precise. ### Sandhill Company Manufacturing Overhead ApplicationSandhill Company applies manufacturing overhead to jobs on the basis of machine hours used. Below are the estimated and actual figures for overhead costs and machine usage hours.#### Estimated Figures:- **Total Overhead Costs:** $245,000- **Machine Usage:** 122,500 hours#### Actual Figures:- **Overhead Costs Incurred:** $315,560- **Machine Hours Used:** 127,400 hours#### Calculation of Manufacturing Overhead Rate:To compute the manufacturing overhead rate for the year, based on the provided data, follow these steps:1. **Estimated Manufacturing Overhead Rate:** \[ \frac{\text{Total Estimated Overhead Costs}}{\text{Total Estimated Machine Hours}} = \frac{\$245,000}{122,500 \text{ hours}} = \$2 \text{ per machine hour} \]#### Confirmation:Upon making the calculations, the system will confirm the correctness of your derived overhead rate. An example of confirmation is shown below:- "Your answer is correct." **Computed Manufacturing Overhead Rate:** \$2 per machine hour (rounded to 2 decimal places).This overhead rate means that Sandhill Company allocates $2 of overhead for every machine hour used during production.

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Description: ### Determining Under- or Overapplied Overhead#### Analyzing Manufacturing OverheadOn December 31st, you are asked to determine the amount of under- or overapplied overhead for the year. The image shows the following elements:1. **Prompt:** - "Wha

Under and Overapplied Overhead -Manufacturing Overheads are considered to be underapplied when the…

Business

Accounting

Sandhill Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $245,000 for the year, and machine usage is estimated at 122,500 hours. For the year, $315,560 of overhead costs are incurred, and 127,400 hours are used.

Sandhill Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $245,000 for the year, and machine usage is estimated at 122,500 hours. For the year, $315,560 of overhead costs are incurred, and 127,400 hours are used.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter26: Manufacturing Accounting: The Job Order Cost System

Section: Chapter Questions

Problem 5SEA: PREDETERMINED FACTORY OVERHEAD RATE Millerlile Enterprises calculates a predetermined factory...

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PREDETERMINED FACTORY OVERHEAD RATE Marston Enterprises calculates a predetermined factory overhead rate so that factory overhead may be applied to production during the month. It calculates the overhead using three different methods and then decides which one to use. Total estimated factory overhead costs are 600,000. Total estimated direct labor hours are 30,000. Total estimated direct labor costs are 1,200,000. Total machine hours are estimated to be 200,000. Calculate the predetermined overhead application rates based on (1) direct labor hours, (2) direct labor costs, and (3) machine hours.
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The actual overhead for a company is $73,175. Overhead was based on 4,500 machine hours and was $3,325 over applied for the year. What is the overhead application rate per direct labor hour? What is the journal entry to dispose of the under applied overhead?
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Use the following information to answer the question. Estimated manufacturing overhead $180,000 Actual manufacturing overhead $240,000 Estimated direct labour hours 15,000 Actual direct labour hours worked 16,000 The predetermined overhead rate for applying manufacturing overhead would be:
ll. Subject : - Accounting
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