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klemol [59]
3 years ago
11

Clear Colors Corporation uses a predetermined overhead rate based on direct labor costs to apply manufacturing overhead to jobs.

At the beginning of the year the Corporation estimated its total manufacturing overhead cost at $350,000 and its direct labor costs at $200,000. The actual overhead cost incurred during the year was $362,000 and the actual direct labor costs incurred on jobs during the year was $208,000. The manufacturing overhead for the year would be:a. $12,000 underapplied
b. $2,000 overapplied
c. $12,000 overapplied
d. $2,000 underapplied
Business
1 answer:
belka [17]3 years ago
7 0

Answer:

b. $ 2,000 overapplied

Explanation:

Firstly, we need to determine the predetermined overhead rate based on direct labor costs.

Estimated total manufacturing Overhead                        $ 350,000

Estimated direct labour costs                                            $ 200,000

Predetermined overhead rate $ 350,000 / $ 200,000   $ 1.75 per $ of direct labour costs.

The total manufacturing overhead <u>applied</u> on direct labor costs of $ 208,000, is:

$ 208,000 * $ 1.75                                                              <u> </u>$ 364,000

Actual overhead costs incurred                                          <u>$ 362,000</u>

Manufacturing overhead over applied                              <u> $      2,000</u>

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Answer:

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Explanation:

We know that at the time of insurance paid in advance on 1 April for 2 years, entry was;

Prepaid Insurance A/c Dr.            $14,400

                 To Cash A/c                                      $14,400

Now at year end the expense relating to current period shall be recognized properly in the books, so that matching principle of revenue against expenses shall be matched.

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That means expense for the year = $5,400

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6 0
3 years ago
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