Ikerd company applies manufacturing overhead to jobs on the basis of machine hours used. overhead costs are expected to total $300,000 for the year, and machine usage is estimated at 125,000 hours. for the year, $322,000 of overhead costs are incurred and 130,000 hours are used. instructions (a) compute the manufacturing overhead rate for the year. (b) what is the amount of under- or overapplied overhead at december 31? (c) prepare the adjusting entry to assig

a.  $2.4

b. $10,000 under-applied

c. Cost of goods sold A/c Dr $10,000

      To Manufacturing overhead    $10,000

Explanation:

a. The computation of the manufacturing overhead rate is shown below:

Manufacturing overhead rate = (Total estimated manufacturing overhead) ÷ (estimated direct labor-hours)

= $300,000 ÷ 125,000 hours

= $2.4

(B) Now we have to find the actual overhead which equals to

= Actual direct labor-hours × predetermined overhead rate

= 130,000 hours × $2.4

= $312,000

So, the ending overhead equals to

= Actual manufacturing overhead - actual overhead

= $322,000 - $312,000

= $10,000 under-applied

c. The adjusting entry is shown below:

Cost of goods sold A/c Dr $10,000

      To Manufacturing overhead    $10,000

(Being the under-applied overhead is adjusted)

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