The following information pertains to Paramus Metal Works for the year just ended.
Budgeted direct-labor cost: 77,000 hours (practical capacity) at $17 per hour Actual direct-labor cost: 79,000 hours at $18 per hour
Budgeted manufacturing overhead: $993,300
Budgeted selling and administrative expenses: $417,000 Actual manufacturing overhead:
Depreciation $225,000
Property taxes 19,000
Indirect labor 79,000
Supervisory salaries 210,000
Utilities 58,000
Insurance 32,000
Rental of space 295,000
Indirect material 79,000
Indirect material:
Beginning inventory, January 1 46,000
Purchases during the year 95,000
Ending inventory, December 31 62,000
Required:
1. Compute the firm's predetermined overhead rate, which is based on direct-labor hours.
2. Calculate the overapplied or underapplied overhead for the year.
3. Prepare a journal entry to close out the Manufacturing Overhead account into Cost of Goods Sold.
4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1) and (2) above. Show how the solution will change if the following data change: budgeted manufacturing overhead was $990,000, property taxes were $25,000, and purchases of indirect material amounted to $97,000.