Answer:
A. Budgeted Manufacturing Overhead = $4,140,000
and Budgeted direct labour hours = 180,000 hrs
Therefore, Budgeted direct labour hourly rate = $4,140,000/180,000hrs
= $23/hr
B. Journal entry to record the allocation of manufacturing Overhead is:
=$23/hr x 189,000 hrs
=$4,347,000
Dr. Cost of Goods Sold with $4,347,000
Cr. Direct Labor Wage Payable with $4,347,000
C. Over allocation = $10,000
The Amount is small to warrant a proration of overhead costs. Creative Woodworking should go ahead and write it off to Cost of Goods Sold in the year.
Explanation:
Creative Wood allocates manufacturing overheads to Jobs based on "Budgeted labour hour rate x Actual Labour Hours"
In 2017
A. Budgeted Manufacturing Overhead = $4,140,000
and Budgeted direct labour hours = 180,000 hrs
Therefore, Budgeted direct labour hourly rate = $4,140,000/180,000hrs
= $23/hr
Actual Manufacturing Overhead however is $4,337,000
and Actual Hours worked by direct labor is 189,000 hrs
Thus Actual Hourly rate for direct labour = $4,337,000/189,000hrs
=$22.947/hr
B. Journal entry to record the allocation of manufacturing Overhead is:
=$23/hr x 189,000 hrs
=$4,347,000
Dr. Cost of Goods Sold with $4,347,000
Cr. Direct Labor Wage Payable with $4,347,000
C. Determination of Under or Over allocated Overhead
Allocated Overhead to Cost of Goods sold = $4,347,000
Actual allocation due to Cost of Goods sold= $4,337,000
Over allocation = $10,000
