Connect Access Card For Fundamental Accounting Principles
Connect Access Card For Fundamental Accounting Principles
24th Edition
ISBN: 9781260158526
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 19, Problem 15E
To determine

Concept Introduction:

Predetermined overhead rate- Predetermined overhead rate is the rate on which company allocates the indirect costs to manufacturing overhead account.

Predetermined overhead allocation rate is calculated as follows-

  = Total estimated overhead cost / Total estimated quantity of the overhead allocation base

To determine Predetermined overhead rate

Expert Solution
Check Mark

Answer to Problem 15E

Predetermined overhead rate

  Predetermined Overhead rate = Estimated overhead costsEstimated material cost Predetermined Overhead rate =$750,000$625,000 Predetermined Overhead rate =120%

Explanation of Solution

Predetermined overhead rate Given,

  • Estimated overhead cost = $750,000
  • Estimated material cost = $625,000
  •   Predetermined Overhead rate = Estimated overhead costsEstimated material cost Predetermined Overhead rate =$750,000$625,000 Predetermined Overhead rate =120%

Conclusion:

Thus, the predetermined overhead determined is 120%.

To determine

Concept Introduction:

T-Account

T-Account is most common type of account. It is the simplest account which makes study of accounting very simple.

This accounts resembles with the English letter 'T'.

T-account has three parts-

  • The title
  • The debit which is on the left side
  • The credit which is on the right side
  • T-Accounts are useful tools for accountants as it helps them to analyze company accounts in effective way.

To set up T-account and determine the applied overhead cost.

Expert Solution
Check Mark

Answer to Problem 15E

Applied overhead cost is calculated as follows-

  Applied overhead cost=Actual direct material cost* Predetermined overhead rateApplied overhead cost=$685,000*120%Applied overhead cost=$822,000

T-Account for factory overhead

    Factory Overhead
    ParticularsAmount ($)ParticularsAmount ($)
    Actual overhead830,000Applied overhead822,000
    Factory overhead (under applied)8,000
    Total830,000Total830,000

Explanation of Solution

Applied Overhead cost-

Given,

  • Direct material cost = $685,000
  • Predetermined overhead rate = 120% (calculated in part1)
  •   Applied overhead cost=Actual direct material cost* Predetermined overhead rateApplied overhead cost=$685,000*120%Applied overhead cost=$822,000

T-account

Given,

  • Actual overhead = $830,000
  • Applied Overhead = $822,000 (Calculated above)
  •   Factory overhead underapplied=Actual overhead AppliedOverheadFactory overhead underapplied=$830,000$822,000Factory overhead underapplied=$8,000

Conclusion:

Thus, applied overhead cost is calculated and T-account is prepared.

To determine

Concept Introduction:

Under or Over applied overhead-

Under or Over applied overhead- It is the difference between the actual and applied overhead.

If the actual overhead incurred is more than the overhead applied during a particular period, then it is a case of under-applied of overhead cost.

If the actual overhead incurred is less than the overhead applied during a particular period, then it is a case of over-applied of overhead cost.

To determine the overapplied or underapplied overhead.

Expert Solution
Check Mark

Answer to Problem 15E

Underapplied overhead is calculated as follows-

  Underapplied overhead=Actual overhead AppliedOverheadUnderapplied overhead=$830,000$822,000Underapplied overhead=$8,000

Explanation of Solution

Given,

  • Actual overhead = $830,000
  • Applied Overhead = $822,000 (Calculated above)
  •   Underapplied overhead=Actual overhead AppliedOverheadUnderapplied overhead=$830,000$822,000Underapplied overhead=$8,000

Since, actual overhead incurred is more than the overhead applied, so overhead is underapplied.

Conclusion:

Thus, under applied overhead cost calculated is $8,000.

To determine

Concept Introduction:

Adjusting entries-

Adjusting entries are prepared to complete the financial statement of the company and to reflect the accrual method of accounting. Adjusting entries are prepared before issuance of financial statement.

To prepare:

To prepare adjusting entry to allocate underapplied overhead costs.

Expert Solution
Check Mark

Answer to Problem 15E

Journal entry-

    S.No.Accounts titles and ExplanationDebit ($)Credit ($)
    Cost of goods sold8,000
    Factory overhead8,000
    (To assign underapplied overhead costs to Cost of goods sold)

Explanation of Solution

Overhead is underapplied which means applied overhead is less than the actual overhead. Cost of goods sold is a cost and its balance is increasing so it is debited and Factory overhead is credited.

Conclusion:

Thus, adjusting entry is prepared.

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Chapter 19 Solutions

Connect Access Card For Fundamental Accounting Principles

Ch. 19 - 11. Why must a company use predetermined overhead...Ch. 19 - How would a hospital apply job order costing?...Ch. 19 - Harley-Davidson manufactures 30 custom-made,...Ch. 19 - Prob. 14DQCh. 19 - Jobs and job lots C1 Determine which of the...Ch. 19 - Job cost sheets C2 Clemens Cars's job cost sheet...Ch. 19 - Documents in job order costing P1 P2 P3 The left...Ch. 19 - Raw materials journal entries P1 During the...Ch. 19 - Prob. 5QSCh. 19 - Prob. 6QSCh. 19 - Prob. 7QSCh. 19 - Prob. 8QSCh. 19 - Prob. 9QSCh. 19 - Prob. 10QSCh. 19 - Prob. 11QSCh. 19 - Prob. 12QSCh. 19 - Jab order costing of services A1 An advertising...Ch. 19 - Job order costing of services A1 An advertising...Ch. 19 - Job cost sheet C2 Eco Skate makes skateboards from...Ch. 19 - Exercise 19-1 Job order production C1 Match each...Ch. 19 - Exercise 19-2 Job cost computation C2 The...Ch. 19 - Exercise 19-3 Analysis of cost flows C2 As of the...Ch. 19 - Exercise 19-4 Recording product costs P1 P2 P3...Ch. 19 - Exercise 19-5 Manufacturing cost flows P1 P2 P3...Ch. 19 - Exercise 19-6 Recording events in job order...Ch. 19 - Exercise 19-7 Cost flows in a jab order costing...Ch. 19 - Exercise 19-8 Journal entries for materials P1 Use...Ch. 19 - Exercise 19-9 Journal entries for labor P2 Use...Ch. 19 - Exercise 19-10 Journal entries for overhead P3 Use...Ch. 19 - Exercise 19-11 Overhead rate; costs assigned to...Ch. 19 - Exercise 19-12 Analyzing costs assigned to work in...Ch. 19 - Exercise 19-13 Adjusting factory overhead P4 Refer...Ch. 19 - Exercise 19-14 Adjusting factory overhead P4...Ch. 19 - Prob. 15ECh. 19 - Prob. 16ECh. 19 - Exercise 19-17 Overhead rate calculation,...Ch. 19 - Exercise 19-18 Job order costing for services A1...Ch. 19 - Exercise 19-19 Job order costing of services A1...Ch. 19 - Exercise 19-20 Direct materials journal entries P1...Ch. 19 - Problem 19-1A Production costs computed and...Ch. 19 - Problem 19-2 A Source documents, journal entries,...Ch. 19 - Prob. 3APSACh. 19 - Prob. 4APSACh. 19 - Problem 19-5A Production transactions, subsidiary...Ch. 19 - Problem 19-1B Production costs computed and...Ch. 19 - Prob. 2BPSBCh. 19 - Prob. 3BPSBCh. 19 - Problem 19-4B Overhead allocation and adjustment...Ch. 19 - Problem 19-5B Production transactions, subsidiary...Ch. 19 - The computer workstation furniture manufacturing...Ch. 19 - The General Ledger tool in Connect automates...Ch. 19 - Manufacturers and merchandisers can apply...Ch. 19 - Prob. 2AACh. 19 - Apple and Samsung compete in the global...Ch. 19 - Assume that your company sells portable housing to...Ch. 19 - Assume that you are preparing for a second...Ch. 19 - Prob. 3BTNCh. 19 - Consider the activities undertaken by a medical...Ch. 19 - Refer to the chapter opener regarding Brennan...Ch. 19 - Prob. 6BTN
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