Regal Woods manufactures jewelry boxes. The primary materials (wood, brass, and glass) and direct labor are assigned directly to the products. Manufacturing overhead costs are allocated based on machine hours. Data for the year follow: Estimated Actual Machine hours 24,500 hours 33,000 hours Maintenance labor (repairs to equipment) $19,000 $27,500 Plant supervisor's salary 41,000 44,000 Screws, nails, and glue 21,000 48,000 Plant utilities 42,000 98,850 Freight out 34,000 47,500 Depreciation on plant and equipment 83,800 82,000 Advertising expense 40,000 59,000 Requirement 1. Compute the predetermined overhead allocation rate. Round to two decimal places. Predetermined overhead ÷ = allocation rate ÷ = per machine hour Requirement 2. Post actual and allocated manufacturing overhead to the Manufacturing Overhead T-account. (Enter the ending balance on the last line.) Manufacturing Overhead Requirement 3. Prepare the journal entry to adjust for underallocated or overallocated overhead. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. Check your spelling carefully and do not abbreviate.) Date Accounts and Explanation Debit Credit Dec. 31

Name: Regal Woods manufactures jewelry boxes. The primary materials (wood,
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Description: Regal Woods manufactures jewelry boxes. The primary materials (wood, brass, and glass) and direct labor are assigned directly to the products. Manufacturing overhead costs are allocated based on machine hours. Data for the year follow: Estimated

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter4: Job Order Costing

Section: Chapter Questions

Problem 2PB: Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500...

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Regal Woods manufactures jewelry boxes. The primary materials (wood, brass, and glass) and direct labor are assigned directly to the products. Manufacturing overhead costs are allocated based on machine hours. Data for the year follow:

	Estimated	Actual
Machine hours	24,500 hours	33,000 hours
Maintenance labor (repairs to equipment)	$19,000	$27,500
Plant supervisor's salary	41,000	44,000
Screws, nails, and glue	21,000	48,000
Plant utilities	42,000	98,850
Freight out	34,000	47,500
Depreciation on plant and equipment	83,800	82,000
Advertising expense	40,000	59,000

Requirement 1. Compute the predetermined overhead allocation rate. Round to two decimal places.

		Predetermined overhead
÷	=	allocation rate
÷	=		per machine hour

Requirement 2. Post actual and allocated manufacturing overhead to the Manufacturing Overhead T-account. (Enter the ending balance on the last line.)

Manufacturing Overhead

Requirement 3. Prepare the journal entry to adjust for underallocated or overallocated overhead. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. Check your spelling carefully and do not abbreviate.)

Date	Accounts and Explanation	Debit	Credit
Dec. 31

Requirement 4. The predetermined overhead allocation rate usually turns out to be inaccurate. Why don't accountants just use the actual manufacturing overhead rate?

The actual manufacturing overhead rate is__________ known at the start of the accounting period never really known not known until the end of the period.
Managers need to make decisions_________ at the end of the period the following year throughout the period.

Accountants use predetermined overhead allocation rates to give managers product cost information when they need it________ .

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