The predetermined overhead rate for Shilling Manufacturing is based on estimated direct labor costs of $350,000 and estimated factory overhead of $770,000. Actual costs incurred were:Direct materials.........................................................................$475,000Direct labor...............................................................................347,000Indirect materials......................................................................78,000Indirect labor.............................................................................143,500Sales commissions....................................................................150,000Factory depreciation..................................................................260,000Property taxes,
factory..............................................................35,000Factory utilities.........................................................................65,000Advertising................................................................................62,500Factory supervision...................................................................185,000a. Calculate the predetermined overhead rate and calculate the overhead applied during the year.b. Prepare the journal entry to eliminate the over- or underapplied overhead, assuming that it is not material in amount.
What will be an ideal response?
a. Predetermined overhead rate = $770,000/$350,000 = 220% of direct labor cost
Overhead applied = $347,000 * 220% = $763,400
b.
| Actual overhead: | ? |
| Indirect materials | $ 78,000 |
| Indirect labor | 143,500 |
| Factory depreciation | 260,000 |
| Property taxes, factory | 35,000 |
| Factory utilities | 65,000 |
| Factory supervision | 185,000 |
| Total actual overhead | $766,500 |
| Overhead applied | 763,400 |
| Underapplied overhead | $ 3,100 |
| Cost of Goods Sold | 3,100 | ? |
| Factory Overhead | ? | 3,100 |
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