In December 2010, Monk Company’s manager estimated next year’s total direct labor cost assuming 40 persons working an average of 1,500 hours each at an average wage rate of $50 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.
|
Indirect labor |
$ 540,000 |
|
Factory supervision |
450,000 |
|
Rent on factory building |
360,000 |
|
Factory utilities |
200,000 |
|
Factory insurance expired |
60,000 |
|
Depreciation—Factory equipment |
300,000 |
|
Repairs expense—Factory equipment |
180,000 |
|
Factory supplies used |
110,000 |
|
Miscellaneous production costs |
200,000 |
|
Total estimated overhead costs |
$2,400,000 |
At the end of 2011, records show the company incurred $2,200,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 625, $300,000; Job 626, $225,000; Job 627, $975,000; Job 628, $240,000; and Job 629, $375,000. In addition, Job 630 is in process at the end of 2011 and had been charged $75,000 for direct labor. No jobs were in process at the end of 2010. The company’s predetermined overhead rate is based on direct labor cost.
Required
1. Determine the following.
a. Predetermined overhead rate for year 2011.
b. Total overhead cost applied to each of the six jobs during year 2011.
c. Over or underapplied overhead at year end 2011.
2. Assuming that any over or underapplied overhead is not material, prepare the adjusting entry to allocate any over or underapplied overhead to Cost of Goods Sold at the end of year 2011.