The Parker Company had the following transactions and events during its first year of operations. Estimated overhead
Question:
The Parker Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000.
a. Purchased materials for cash, $567,000.
b. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases
c. Direct labor for production is $331,000, indirect labor is $125,000.
d. Overhead incurred (not including materials or labor): $529,000.
e. Overhead is applied to production based on direct labor cost at the rate of __ _ percent.
Required:
Part 1. What is the Predetermined Overhead Rate for the year?
770,000/350,000= 220%
Part 2. Prepare the journal entries to record transactions a - e.
a) Date: Materials Inventory 567,000
Cash 567,000
(to record purchase of materials)
b) Date: WIP 481,950
MOH 68,040
Materials Inventory 549,990
(to record requisition of materials)
c) Date: WIP 331,000
MOH 125,000
Wages Payable 456,000
(to record wages expense incurred)
d) MOH 529,000
Various Accounts 529,000
(to record overhead incurred)
e) ????
Part 3 – Is the overhead over- or under- applied and by how much?
Part 4 – Prepare the journal entry to make the adjustment of over- or under-applied overhead to Cost of Goods Sold.
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds