Question - In December 2010, Gomez Company's manager estimated next year's total direct labor cost assuming 50 persons working an average of 2,070 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.
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Indirect labor
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$214,750
|
|
Factory supervision
|
123,000
|
|
Rent on factory building
|
88,000
|
|
Factory utilities
|
44,200
|
|
Factory insurance expired
|
34,600
|
|
Depreciation-Factory equipment
|
245,000
|
|
Repairs expense-Factory equipment
|
30,900
|
|
Factory supplies used
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34,900
|
|
Miscellaneous production costs
|
23,000
|
|
Total estimated overhead costs
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$838,350
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At the end of 2011, records show the company incurred $789,080 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $362,000; Job 202, $333,000; Job 203, $170,000; Job 204, $422,000; and Job 205, $183,000. In addition, Job 206 is in process at the end of 2011 and had been charged $12,000 for direct labor. No jobs were in process at the end of 2010. The company's predetermined overhead rate is based on direct labor cost.
Required
1a. Determine the predetermined overhead rate for year 2011.
1b. Determine the total overhead cost applied to each of the six jobs during year 2011.
1c. Determine the over- or underapplied overhead at year-end 2011.
2. Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of year 2011.