Harwood Company is a manufacturing firm that operates a job-order costing system. Overhead costs are applied to jobs on the basis of machine-hours. At the beginning of the year, management estimated that the company would incur $192,000 in manufacturing overhead costs and work 80,000 machine-hours.

Required:

1. Compute the company?s predetermined overhead rate.

2. Assume that during the year the company works only 75,000 machine-hours and incurs the following costs in the manufacturing overhead and work-in-process accounts:

Copy the data in the previous T-accounts onto your answer sheet. Compute the amount of overhead cost that would be applied to work in process for the year, and make the entry in your T-accounts.

3. Compute the amount of under- or overapplied overhead for the year, and show the balance in your manufacturing overhead T-account. Prepare a general journal entry to close out the balance in this account to cost of goods sold.

4. Explain why the manufacturing overhead was under- or overapplied for the year.

Transcribed Image Text:

Manufacturing Overhead (Maintenance) 19,000 (Indirect materials) 6,000 (Indirect labour) 60,000 (Utilities) 30,000 7,000 (Insurance) (Depreciation) 54,000 8,000 (Property taxes) Work in Process (Direct materials) 710,000 (Direct labour) 90,000 (Overhead)