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Item 3

Item 3 10 points

Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's predetermined overhead rate of $2.80 per machine-hour was based on a cost formula that estimates $282,800 of total manufacturing overhead for an estimated activity level of 101,000 machine-hours.

Required:

1. Assume that during the year the company works only 96,000 machine-hours and incurs the following costs in the Manufacturing Overhead and Work in Process accounts: 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.

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.

Manufacturing Overhead					Work in Process
(Maintenance)	42,000		(a)		(Direct materials)	920,000
(Indirect materials)	10,100				(Direct labor)	111,000
(Indirect labor)	90,000				(Overhead) (a)
(Utilities)	48,000
(Insurance)	9,100
(Depreciation)	72,000
Balance

2A. Compute the amount of underapplied or overapplied overhead for the year and show the balance in your Manufacturing Overhead T-account.

2B. Prepare a journal entry to close the company's underapplied or overapplied overhead to Cost of Goods Sold.