Managerial Accounting
16th Edition
ISBN: 9781259995484
Author: Ray Garrison
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 3, Problem 4E
EXERCISE 3-4 Underapplied and Overapplied
Osborn Manufacturing uses a predetermined overhead rate of $ 18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218;400 of total manufacturing overhead for an estimated activity level of 12:000 direct labor-hours.
The company actually incurred $215:000 of manufacturing overhead and 11,500 direct labor-hours during the period.
Required:
- Determine the amount of underappEed or overapplied manufacturing overhead for the period.
- Assume that the company s underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the
journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin? By how much
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Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO P4
At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates: overhead costs, $960,000, and direct materials costs, $400,000.At year-end, the company reports that actual overhead costs for the year are $969,300 and actual direct materials costs for the year are $400,000. 1. Determine the predetermined overhead rate using estimated direct materials costs2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year.3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.
Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO
P4
At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates:
overhead costs, $1,040,000, and direct materials costs, $400,000.At year-end, the company reports that actual overhead costs
for the year are $1,049,400.
1. Determine the predetermined overhead rate using estimated direct materials costs
2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the
predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year.
3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Determine the predetermined overhead rate using estimated direct materials costs.
Overhead Rate
Numerator:
Denominator:
Overhead…
Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO P4
At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates: overhead
costs, $1,020,000, and direct materials costs, $600,000.At year-end, the company reports that actual overhead costs for the year are
$1,028,400 and actual direct materials costs for the year are $600,000.
1. Determine the predetermined overhead rate using estimated direct materials costs
2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the
predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year.
3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Enter the actual overhead costs incurred and the amount of overhead…
Chapter 3 Solutions
Managerial Accounting
Ch. 3.A - EXERCISE 3A-1 Transaction Analysis LO3-5 Carmen...Ch. 3.A - EXERCISE 3A-2 Transaction Analysis LO3-5 Adams...Ch. 3.A - EXERCISE 3A-3 Transaction Analysis LO3-5 Dixon...Ch. 3.A - PROBLEM 3A-4 Transaction Analysis LO3-5 Morrison...Ch. 3.A - PROBLEM 3A-5 Transaction Analysis LO3-5 Star...Ch. 3.A -
PROBLEM 3A-6 Transaction Analysis LO3-5
Brooks...Ch. 3 - Prob. 1QCh. 3 - Prob. 2QCh. 3 - What is underapplied overhead Overapplied...Ch. 3 - 3-4 Provide two reasons why overhead might be...
Ch. 3 - Prob. 5QCh. 3 - How do you compute the raw materials used in...Ch. 3 - Prob. 7QCh. 3 - How do you compute the cost of goods manufactured?Ch. 3 - Prob. 9QCh. 3 - Prob. 10QCh. 3 - Prob. 1AECh. 3 - Prob. 2AECh. 3 - Prob. 3AECh. 3 - Prob. 4AECh. 3 - Prob. 1F15Ch. 3 - Prob. 2F15Ch. 3 - Bunnell Corporation is a manufacturer that uses...Ch. 3 - Prob. 4F15Ch. 3 - Prob. 5F15Ch. 3 - Bunnell Corporation is a manufacturer that uses...Ch. 3 - Prob. 7F15Ch. 3 - Prob. 8F15Ch. 3 - Prob. 9F15Ch. 3 - Prob. 10F15Ch. 3 - Bunnell Corporation is a manufacturer that uses...Ch. 3 - Prob. 12F15Ch. 3 - Prob. 13F15Ch. 3 - Prob. 14F15Ch. 3 - Prob. 15F15Ch. 3 - EXERCISE 3-1 Prepare Journal Entries LO3-1 Lamed...Ch. 3 - Prob. 2ECh. 3 - EXERCISE 3-3 Schedules of Cost of Goods...Ch. 3 - EXERCISE 3-4 Underapplied and Overapplied Overhead...Ch. 3 - Prob. 5ECh. 3 - EXERCISE 3-6 Schedules of Cost of Goods...Ch. 3 - (
$
15,000...Ch. 3 - EXERCISE 3-8 Applying Overhead: Journal Entries;...Ch. 3 - Prob. 9ECh. 3 - Prob. 10ECh. 3 -
PROBLEM 3-11: T-Account Analysis of Cost Flows...Ch. 3 - Prob. 12PCh. 3 - PROBLEM 3-13 Schedules of Cost of Goods...Ch. 3 - Prob. 14PCh. 3 -
PROBLEM 3-15 Journal Entries; T-Accounts;...Ch. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18C
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- Exercise 15-26 (Algo) Computing applied overhead and closing over- or underapplied overhead LO P4 At the beginning of the year, Custom Manufacturing set its predetermined overhead rate using the following estimates: overhead costs, $1,040,000, and direct materials costs, $400,000.At year-end, the company reports that actual overhead costs for the year are $1,049,400. 1. Determine the predetermined overhead rate using estimated direct materials costs 2. Enter the actual overhead costs incurred and the amount of overhead cost applied to jobs during the year using the predetermined overhead rate. Determine whether overhead is over- or underapplied (and the amount) for the year. 3. Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the entry to close any over- or underapplied overhead to Cost of Goods Sold. No Date General…arrow_forwardExercise 7-40 (Algo) Calculating Expected Activity Using the Predetermined Overhead Rate (LO 7-3) Auduon, Incorporated uses a predetermined factory overhead rate based on machine-hours. For October, Audubon recorded $5.300 In overapplied overhead, based on 34.900 actual machine-hours worked and actual manufacturing overhead incurred of $599,517 Audubon estimated manufacturing overhead for October to be $568,424. Required: What was the estimated number of machine-hours Audubon expected in October? Note: Do not round intermediate calculations. Expected machine-hours machine-hoursarrow_forwardExercise 11-5A (Algo) Treatment of overapplied or underapplied overhead LO 11-2 Pawhuska Company estimates that its overhead costs for Year 2 will be $594,000 and output in units of product will be 270,000 units. Required a. Calculate Pawhuska's predetermined overhead rate based on expected production. (Round your answer to 2 decimal places.) b. If 22,000 units of product were made in March Year 2, how much overhead cost would be allocated to the Work in Process Inventory account during the month? (Do not round intermediate calculations.) c. If actual overhead costs in March were $46,900, would overhead be overapplied or underapplied and by how much? (Do not round intermediate calculations.) a. Predetermined overhead rate b. Allocated overhead cost c. Overhead costs per unitarrow_forward
- Underapplied and Overapplied Overhead Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218,400 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours. The company actually incurred $215,000 of manufacturing overhead and 11,500 direct labor-hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2. Assume that the company’s underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin? By how much?arrow_forwardExercise 11-6A (Algo) Recording overhead costs in T-accounts LO 11-2 Fanning Company and Finch Company both apply overhead to the Work in Process Inventory account using direct labor hours. The following information is available for both companies for the year. Actual manufacturing overhead Actual direct labor hours Underapplied overhead Overapplied overhead Required Fanning Company $ 170,900 26,000 $ 21,500 Finch Company $ 238,400 24,000 14,000 a. Compute the predetermined overhead rate for each company. b. Using T-accounts, record the entry to close the overapplied or underapplied overhead at the end of the accounting period for each company, assuming the amounts are immaterial. Required A Required B Complete this question by entering your answers in the tabs below. Using T-accounts, record the entry to close the overapplied or underapplied overhead at the end of the accounting period for each company, assuming the amounts are immaterial. Adjusting Entry for Fanning Company: < Prev 2…arrow_forwardPROBLEM I ABC Company's total overhead costs at various levels of activity are presented below: March April May June. Machine Hours Total Overhead Costs $216,800 $194,000 $239,600 $262,400 60,000 50,000 70,000 80,000 Assume that the overhead costs above consist of utilities, supervisory salaries, and maintenance. At the 50,000 machine-hour level of activity these costs are: Utilities (V). Supervisory salaries (F). Maintenance (M).. Total overhead cost V = Variable; F = Fixed; M = Mixed The company wants to break down the maintenance cost into its basic variable and fixed cost elements. Required: $ 54,000 62,000 78.000 $194.000 a. Estimate the maintenance cost for June. b. Use the high-low method to estimate the cost formula for maintenance cost. c. Estimate the total overhead cost at an activity level of 55,000 machine hours.arrow_forward
- Exercise 11-6A (Algo) Recording overhead costs in T-accounts LO 11-2 Rundle Company and Rooney Company both apply overhead to the Work in Process Inventory account using direct labor hours. The following information is available for both companies for the year. Rundle Actual manufacturing overhead Aatual direet labor hours Underapplied overhead Overapplied overhead Сoпpany $119,150 21,000 Rooney Company $262,250 25,000 11,000 $ 21,500 Required a. Compute the predetermined overhead rate for each company. b. Using T-accounts, record the entry to close the overapplied or underapplied overhead at the end of the accounting period for each company, assuming the amounts are immaterial. Complete this question by entering your answers in the tabs below. Required A Required B Compute the predetermined overhead rate for each company. (Round your answers to 2 decimal places.) Per Direct Labor Hour Rundle Compamy Rooney Company Predetermined overhead rate Required A Required B>arrow_forwardd. General costs Crinks Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 11,200 hours and the total estimated manufacturing overhead was $259,840. At the end of the year, actual direct labor-hours for the year were 10,800 hours and the actual manufacturing overhead for the year was $254,840. Overhead at the end of the year was a. $4,280 overapplied b. $9,280 overapplied c. $9,280 underapplied d. $4,280 underapplied Majan company has lasudgeted sales in units for the next five months as follows:arrow_forwardNova Company's total overhead cost at various levels of activity are presented below Total Overhead Machine- Month Hours Cost April May June 52,000 42,000 62,000 72,000 $203,860 $181,060 $226,660 $249,460 July Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 42,000 machine-hour level of activity is: Utilities (variable) Supervisory salaries (fixed) Maintenance (mixed) Total overhead cost S 50,400 67,000 63.660 181,060 Nova Company's management wants to break down the maintenance cost into its variable and fixed cost elements Required: 1. Estimate how much of the $249,460 of overhead cost in July was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $249,460 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Do not round intermediate calculations.) Maintenance cost in July 2. Using the high-low method,…arrow_forward
- Exercise 4-5 Assigning Overhead to Products in ABC [LO4-2, LO4-3] Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure ExpectedOverhead Cost Expected Activity Labor-related Direct labor-hours $ 156,000 26,000 DLHs Purchase orders Number of orders $ 11,000 220 orders Parts management Number of part types $ 80,000 100 part types Board etching Number of boards $ 90,000 2,000 boards General factory Machine-hours $ 180,000 20,000 MHs Required: 1. Compute the activity rate for each of the activity cost pools. 2. The expected activity for the year was distributed among the company’s four products as follows: Expected Activity Activity Cost Pool Product A Product B Product C Product D Labor-related (DLHs) 6,000 11,000 4,000 5,000 Purchase orders (orders) 60…arrow_forward2-2 i k nces - Saved Manufacturing overhead applied Luthan Company uses a plantwide predetermined overhead rate of $22.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $274,800 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. Check my work Q Search lipi Si TE Find Solu Texti Qarrow_forwardExercise 3-4 (Algo) Underapplied and Overapplied Overhead [LO3-4] Osborn Manufacturing uses a predetermined overhead rate of $19.40 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $256,080 of total manufacturing overhead for an estimated activity level of 13,200 direct labor-hours. The company actually incurred $251,000 of manufacturing overhead and 12,700 direct labor-hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company's gross margin? By how much? 1. Manufacturing overhead 2. The gross margin would by byarrow_forward
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