19-20

Metal Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. At the beginning of 2016, the company expected to incur the following:

Manufacturing overhead cost	$870, 000
Direct labor costs	1,450,000
Machine hours	72, 500 hours

At the end of 2016, the company had actually incurred:

Direct labor	$1, 160, 000
Depreciation on manufacturing plant and equipment	610, 000
Property taxes on plant	40, 000
Sales saleries	27, 500
Delivery drivers' wages	24, 000
Plant janitor's wages	18, 000
Machine hours	65, 000 hours

Compute Metals predetermined overhead allocation rate.

Prepare the journal entry to allocate manufacturing overhead

Date		Accounts and Explanation						Debit	Credit

Post the manufacturing overhead transactions to the Manufacturing Overhead T-account.

*Is manufacturing overhead underallocated or overallocated? By how much?

Manufacturing Overhead

Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead.

*Does your entry increase or decrease cost of goods sold?

Date		Accounts and Explanation						Debit	Credit