Millerby Inc. assembles and sells hand drills. All parts are purchased, and the cost of the parts per drill totals $50. Labor is paid on the basis of $32 per drill assembled. Because the company handles only this one product, the unit cost base is used for applying factory overhead at a predetermined rate. Estimated factory overhead for the coming period, based on a production of 30,000 drills, is as follows:
Indirect materials ...................................... $220,000
Indirect labor .......................................... 240,000
Light and power ...................................... 30,000
Depreciation .......................................... 25,000
Miscellaneous .......................................... 55,000
During the period, actual factory overhead was $561,600 and 29,000 drills were assembled. These units were completed but not yet transferred to the finished goods storeroom.
Required:
(1) Prepare the journal entries to record the preceding information.
(2) Determine the amount of over- or under applied factory overhead.