Fundamentals of Management Accounting

Question 1:

1)

.

Predetermined overhead rate = 218,400/12000 = $18.2/ DLH

Manufacturing overhead applied = 18.2× 11,500 = $209,300

Actual manufacturing overhead cost ............................................. $215,000

Deduct: Manufacturing overhead applied...................................... 209,300

Manufacturing overhead under-applied......................................... $ (5,700)

2). Journal entry: Dr COGS 5,700

Cr MOH 5,700

Because manufacturing overhead is underapplied, the cost of goods sold would increase

by $5,700 and the gross margin would decrease by $5,700.

Question 2:

1). The estimated total manufacturing overhead cost is computed as follows:

Y = $750,000 + $4.00 per MH × 150,000 MHs

Estimated fixed manufacturing overhead.......................................... $ 750,000

Estimated variable manufacturing overhead

$4.00 per MH × 150,000 MHs ...................................................... 600,000

Estimated total manufacturing overhead cost ................................... $1,350,000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead (a)........................ $1,350,000

Estimated total machine-hours (MHs) (b)........................... 150,000 MHs

Predetermined overhead rate (a) ÷ (b)................................. $9.00 per MH

2). Total manufacturing cost assigned to Job 500:

Direct materials................................................... $350

Direct labor.......................................................... 230

Manufacturing overhead applied

$9.00 per MH × 30 MHs ................................. 270

Total manufacturing cost..................................... $850

3). Computing underapplied/overapplied overhead:

Actual machine-hours (a)................................................ 140,000

Predetermined overhead rate (b)..................................... $9.00

Manufacturing overhead applied (a) ×(b)....................... $1,260,000

ctual...