Chapter 19, Problem E19.20E

Allocating and adjusting manufacturing overhead
Learning Objectives 3,5
1. $12perMHr
Young Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. At the beginning of 2018, the company expected to incur the following:

Manufacturing Overhead Costs	$840,000
Direct Labor Costs	1,480,000
Machine hours	70,000 hours

At the end of 2018, the company had actually incurred:

Direct labor costs	$1,230,000
Depreciation on manufacturing plant and equipment	620,000
Property taxes on plant	35,500
Sale salaries	26,000
Delivery drivers' wages	22,500
Plant janitors' wages	17,000
Machine hours	60,000 hours

Requirements

1. Compute Young's predetermined overhead allocation rate.
2. Prepare the journal entry to allocate manufacturing overhead.
3. Post the manufacturing overhead transactions to the Manufacturing Overhead T-account. Is manufacturing overhead underallocated or overallocated? By how much?
4. Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead. Does your entry increase or decrease Cost of Goods Sold?