1. Chan Company estimates that annual manufacturing overhead costs will be $500,000. Chan allocates overhead to...

 

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1. Chan Company estimates that annual manufacturing overhead costs will be $500,000. Chan allocates overhead to jobs based on machine hours, and it expects that 100,000 machine hours will be required for the year. Calculate the predetermined overhead rate. 2. Why might Chan Company use machine hours as the overhead allocation base? 3. Assume Chan Company incurs actual manufacturing overhead costs of $470,000 and applies overhead of $510,000 for the year. Account balances are as follows: WIP inventory, $25,000; finished goods inventory, $25,000; and cost of goods sold, $50,000. a. Is overhead overapplied or underapplied? Explain your answer. b. How is the manufacturing overhead account closed assuming the balance is immaterial. Explain. c. How is the manufacturing overhead account closed assuming the balance is material. Explain. 1. Chan Company estimates that annual manufacturing overhead costs will be $500,000. Chan allocates overhead to jobs based on machine hours, and it expects that 100,000 machine hours will be required for the year. Calculate the predetermined overhead rate. 2. Why might Chan Company use machine hours as the overhead allocation base? 3. Assume Chan Company incurs actual manufacturing overhead costs of $470,000 and applies overhead of $510,000 for the year. Account balances are as follows: WIP inventory, $25,000; finished goods inventory, $25,000; and cost of goods sold, $50,000. a. Is overhead overapplied or underapplied? Explain your answer. b. How is the manufacturing overhead account closed assuming the balance is immaterial. Explain. c. How is the manufacturing overhead account closed assuming the balance is material. Explain.

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1 To calculate the predetermined overhead rate divide the estimated annual manufacturing overhead costs by the estimated machine hours required for th... View the full answer