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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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(Appendix 4A) Overhead Application, Journal Entries, Job Cost

At the beginning of the year, Smith Company budgeted overhead of $129,600 as well as 13,500 direct labor hours. During the year, Job K456 was completed with the following information: direct materials cost, $2,750; direct labor cost, $5,355. The average wage for Smith Company employees is $17 per hour.

By the end of the year, 18,100 direct labor hours had actually been worked, and Smith incurred the following actual overhead costs for the year:

Chapter 4, Problem 62P, (Appendix 4A) Overhead Application, Journal Entries, Job Cost At the beginning of the year, Smith

Required:

  1. 1. Calculate the overhead rate for the year.
  2. 2. Calculate the total cost of Job K456.
  3. 3. Prepare the journal entries to record actual overhead and to apply overhead to production for the year.
  4. 4. Is overhead overapplied or underapplied? By how much?
  5. 5. Assuming that the normal cost of goods sold for the year is $635,600, what is the adjusted cost of goods sold?

1.

To determine

Compute overhead rate for the year.

Explanation

Overhead Rate:

The amount which is calculate at the beginning of the accounting year for a related activity by dividing the total estimated annual overhead by estimated annual activity level is known as the overhead rate.

Use the following formula to calculate overhead rate for the year:

Overheadrate=EstimatedannualoverheadEstimatedannual

2.

To determine

Compute total cost of Job K456.

3.

To determine

Pass the journal entries to record actual overhead and to apply overhead to the production for the year.

4.

To determine

Compute overapplied or underapplied overhead.

5.

To determine

Calculate the adjusted cost of goods sold.

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