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Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: |
Computer-hours | 85,000 | |
Fixed manufacturing overhead cost | $ | 1,275,000 |
Variable manufacturing overhead per computer-hour | $ | 3.00 |
|
During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year: |
Computer-hours | 60,000 | |
Manufacturing overhead cost | $ | 1,350,000 |
Inventories at year-end: | ||
Raw materials | $ | 400,000 |
Work in process | $ | 160,000 |
Finished goods | $ | 1,040,000 |
Cost of goods sold | $ | 2,800,000 |
|
Required: |
1. |
Compute the company’s predetermined overhead rate for the year. |
Predetermined overhead rate | $ per hour |
2. |
Compute the underapplied or overapplied overhead for the year. (Input the amount as a positive value.) |
(Click to select)UnderappliedOverapplied overhead cost | $ |
3.1 |
Assume the company closes any underapplied or overapplied overhead directly to Cost of Goods Sold. Prepare the appropriate journal entry. |
General Journal | Debit | Credit |
(Click to select)Cost of goods soldManufacturing overheadRaw materialsSalaries expenseAccounts payableWork in processDepreciation expenseFinished goods | ||
(Click to select)Depreciation expenseWork in processAccounts payableCost of goods soldManufacturing overheadFinished goodsSalaries expenseRaw materials |