Selected cost data for DD Manufacturing are as follows: Estimated manufacturing overhead cost for the year

Selected cost data for DD Manufacturing are as follows:

Estimated manufacturing overhead cost for the year 100,000.00

Estimated direct labor cost for the year 80,000.00

Actual overhead manufacturing cost for the year 83,000.00

Actual direct labor cost for the year  64,000.00

1) Compute the predetermined overhead allocation rate per direct dollar

2) Prepare the journal entry to allocate overhead costs for the year using


3) Use a T-account to determine the amount of underallocated or overalloccated manufacturing overhead using Manufacturing Overhead

4 )Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead using

 Answer

Required No. 1

Solution

Predetermined Overhead Allocation Rate = (Estimated Manufacturing Overhead Cost for the Year/Estimated Direct Labor Cost for the Year) x 100

Predetermined Overhead Allocation Rate = (100,000 /80,000) x 100  = 125%

Required No. 2

Solution

Work-in-Process Inventory Debit (64,000*125%) 80,000

                                       Manufacturing Overhead Credit 80,000

 

Required No. 3

Solution

The T account is prepared as below:

Manufacturing Overhead
83,000	80,000

Based on the above account, it can be concluded that the manufacturing overhead is under allocated by $3,000 (83,000 - 80,000).

 

Required No. 4

Solution

The journal entry to to adjust for the underallocated or overallocated manufacturing overhead is as follows:

Date	Accounts and Explanation	Debit	Credit
	Cost of Goods Sold	$3000
	Manufacturing Overhead		$3000
	(To adjust for under allocated manufacturing overhead)

 

 

Thanks