In
December 2010, Gomez Company’s manager estimated next year’s total direct labor
cost assuming 50 persons working an average of 2,000 hours each at an average
wage rate
P19-4A
Overhead allocation and adjustment using a predetermined
overhead rate
P19-4A
In December 2010, Gomez Company’s manager estimated next year’s total direct
labor cost assuming 50 persons working an average of 2,000 hours each at an
average wage rate of $15 per hour. The manager also estimated the following
manufacturing overhead costs for year 2011.
Indirect
labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $159,600
Factory
supervision . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Rent
on factory building . . . . . . . . . . . . . . . . . . . . 70,000
Factory
utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,000
Factory
insurance expired . . . . . . . . . . . . . . . . . . . 34,000
Depreciation—Factory
equipment . . . . . . . . . . . . 240,000
Repairs
expense—Factory equipment . . . . . . . . . 30,000
Factory
supplies used . . . . . . . . . . . . . . . . . . . . . . 34,400
Miscellaneous
production costs . . . . . . . . . . . . . . 18,000
Total
estimated overhead costs . . . . . . . . . . . . . . $750,000
At
the end of 2011, records show the company incurred $725,000 of actual overhead
costs. It completed
and
sold five jobs with the following direct labor costs: Job 201, $354,000; Job
202, $330,000; Job 203,
$175,000;
Job 204, $420,000; and Job 205, $184,000. In addition, Job 206 is in process at
the end of 2011
and
had been charged $10,000 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
1.
Determine the following.
a.
Predetermined overhead rate for year 2011.
b.
Total overhead cost applied to each of the six jobs during year 2011.
c.
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.
Check
(1c) $11,500 overapplied (2) Dr. Factory Overhead $11,500
SOLUTION PREVIEW
GOMEZ COMPANY
Overhead
|
a.
Predetermined overhead application rate
|
|
|
|
Estimated overhead costs
|
750,000
|
<-Correct!
|
|
Estimated direct labor cost
|
1,500,000
|
<-Correct!
|
|
Overhead application rate
|
50%
|
<-Correct!
|
File name: P19-4A-Gomez-Company.xls File type: XLS Price: $8
