Tomek Company uses a job costing system that applies factory overhead on the basis of direct labor-hours. The company’s factory overhead budget for 2010 included the following estimates: Budgeted total factory overhead ........$568,000 Budgeted total direct labor-hours ....... 71,000 At the end of the year, the company shows these results: Actual factory overhead ...........$582,250 Actual direct labor-hours ........... 71,500 The

Tomek Company uses a job costing system that applies factory overhead on the basis of direct labor-hours. The company’s factory overhead budget for 2010 included the following estimates:

Budgeted total factory overhead ........$568,000

Budgeted total direct labor-hours ....... 71,000

At the end of the year, the company shows these results:

Actual factory overhead ...........$582,250

Actual direct labor-hours ........... 71,500

The following amounts of the year’s applied factory overhead remained in the various manufacturing accounts:

Applied Factory Overhead

Work-in-process inventory ...........$139,000

Finished goods inventory ........... 216,840

Cost of goods sold ............. 200,160


Required

1. Compute the firm’s predetermined factory overhead rate for 2010.

2. Calculate the amount of overapplied or underapplied overhead.

3. Prepare a journal entry to transfer the underapplied or overapplied overhead to the Cost of Goods Sold account (do not use proration).


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Cost management a strategic approach

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