Chapter 7, Problem 31E

Prorate Over- or Underapplied Overhead

Refer to the information in Exercise 7-30. Prepare an entry to allocate over- or underapplied overhead to:

1. a.      Work in Process.
2. b.      Finished Goods.
3. c.       Cost of Goods Sold.

7-30 Predetermined Overhead Rates

Aspen Company estimates its manufacturing overhead to be $625,000 and its direct labor costs to be $500,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $195,000. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $325,000. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $130,000. Actual manufacturing overhead for year 2 was $800,000. Manufacturing overhead is applied on the basis of direct labor costs.

Required

1. a.      How much overhead was applied to each job in year 2?
2. b.      What was the over- or underapplied manufacturing overhead for year 2?