Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.50 per machine-hour was based on a cost formula that estimates $217,500 of total manufacturing overhead for an estimated activity level of 87,000 machine-hours. Required: 1. Assume that during the year the company works only 82,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: Compute the amount of overhead cost that would be applied to Work in Process for the year and make the entry in your T-accounts. 2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account.

Question Completion:

Manufacturing Overhead Account

Maintenance     $24,000

Indirect materials  8,300

Indirect labor      82,000

Utilities               36,000

Insurance             7,300

Depreciation     65,000

Total costs   $222,600

Work in Process

Direct materials    $740,000

Direct labor               83,000

Harwood Company

1. The amount of overhead cost that would be applied to Work in Process for the year is:

= $205,000.

2. T- Accounts:

Work in Process

Direct materials    $740,000

Direct labor               83,000

Applied overhead  205,000

Manufacturing overhead

Maintenance     $24,000

Indirect materials  8,300

Indirect labor      82,000

Utilities               36,000

Insurance             7,300

Depreciation     65,000

Applied overhead: WIP    $205,000

Underapplied overhead        17,600

Total costs   $222,600   $222,600

2A. The amount of underapplied overhead for the year is:

= $17,600

2B. Manufacturing overhead

Maintenance     $24,000

Indirect materials  8,300

Indirect labor      82,000

Utilities               36,000

Insurance             7,300

Depreciation     65,000

Applied overhead: WIP    $205,000

Underapplied overhead       17,600

Total costs   $222,600   $222,600

Explanation:

a) Data and Calculations:

Predetermined overhead rate per machine-hour = $2.50

Estimated total manufacturing overhead = $217,500

Estimated activity level = 87,000

Actual results from production during the year:

Machine-hours worked = 82,000

Applied overhead costs = $205,000 (82,000 * $2.50)

Total manufacturing costs incurred = $222,600

Underapplied overhead = $17,600

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.