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?