Chapter 2, Problem 2.5E

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $300,000 for the year, and machine usage is estimated at 125,000 hours.

For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.

Instructions

(a) Compute the manufacturing overhead rate for the year.

(b) What is the amount of under- or overapplied overhead at December 31?

(c) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.