Question

Brooks Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. At the beginning of 2014, the company expected to incur the following:
Manufacturing overhead cost ................ $ 840,000
Direct labor costs .................... 1,550,000
Machine hours ..................... 70,000 hours
At the end of 2014, the company had actually incurred:
Direct labor cost ....................$ 1,160,000
Depreciation on manufacturing plant and equipment ..... 600,000
Property taxes on plant .................. 40,000
Sales salaries ..................... 26,500
Delivery drivers’ wages ................ 23,500
Plant janitor’s wages .................. 17,000
Machine hours ..................... 67,000 hours

Requirements
1. Compute Brooks’ predetermined overhead allocation rate.
2. Prepare the journal entry to allocate manufacturing overhead.
3. Post the manufacturing overhead transactions to the Manufacturing Overhead T-account. Is manufacturing overhead underallocated or overallocated? By how much?
4. Prepare the journal entry to adjust for the underallocated or overallocated manu-facturing overhead. Does your entry increase or decrease cost of goods sold?



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  • CreatedJanuary 16, 2015
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