FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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At the beginning of the year, Learer Company’s manager estimated total direct labor cost assuming 30 persons working an average of 2,000 hours each at an average wage rate of $40 per hour. The manager also estimated the following
| Indirect labor | $ | 334,200 | |
| Factory supervision | 143,000 | ||
| Rent on factory building | 155,000 | ||
| Factory utilities | 103,000 | ||
| Factory insurance expired | 83,000 | ||
| 412,000 | |||
| Repairs expense—Factory equipment | 75,000 | ||
| Factory supplies used | 83,800 | ||
| Miscellaneous production costs | 51,000 | ||
| Total estimated overhead costs | $ | 1,440,000 | |
At year-end, records show the company incurred $1,592,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $619,000; Job 202, $578,000; Job 203, $313,000; Job 204, $731,000; and Job 205, $329,000. In addition, Job 206 is in process at the end of the year and had been charged $32,000 for direct labor. No jobs were in process at the beginning of the year. The company’s predetermined overhead rate is based on direct labor cost.
Required
1. Determine the predetermined overhead rate for the year.
2. Determine the total overhead cost applied to each of the six jobs during the year.
3. Determine the over-or underapplied overhead at the year-end.
4. Assuming that any over-or underapplied overhead is not material, prepare the
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