Consequence of the raw materials transactions


Question 1:

Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. For the month of October, Avery's estimated manufacturing overhead cost was $279,000 based on an estimated activity level of 93,000 direct labor-hours. Actual overhead amounted to $310,000 with actual direct labor-hours totaling 106,000 for the month. How much was the overapplied or underapplied overhead?

$8,000 overapplied

$12,000 underapplied

$12,000 overapplied

$8,000 underapplied

Question 2:

On November 1, Arvelo Corporation had $33,000 of raw materials on hand. During the month, the company purchased an additional $82,000 of raw materials. During November, $55,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,100.

Prepare journal entries to record these events. Use those journal entries to answer the following questions:

The credits to the Manufacturing Overhead account as a consequence of the raw materials transactions in November total:

$55,000

$4,100

$52,000

$0

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Accounting Basics: Consequence of the raw materials transactions
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