Answer:
1) Predetermined overhead rate= $8.88 per machine hour
2) Total Manufacturing Costs = $ 929.66
3a)Underapplied overhead for the year= $ 5500
3-b) If the overhead is underapplied and it is corrected by increasing Cost of Goods Sold so it reduces net income.
Explanation:
Moody Corporation
Machine-hours required to support estimated production 156,000
Fixed manufacturing overhead cost $652,000
Variable manufacturing overhead cost per machine-hour $4.70
Variable manufacturing overhead=$4.70* 156,000
= $ 733,200
Predetermined overhead rate= Total Overhead Costs/ Direct Labor Hours
1) Predetermined overhead rate= $652,000
+$ 733,200/ 156,000
= $8.88 per machine hour
Job 400
Direct materials requisitioned $400
Direct labor cost $210
Machine-hours used 36
Manufacturing Overhead = $ 8.88 * 36= $ 319.66
2) Total Manufacturing Costs = $ 929.66
3) Actual manufacturing overhead costs $1,301,980
Total machine-hours on all jobs 146,000
Predetermined overhead rate= $8.88 per machine hour
Applied manufacturing overhead costs= 146000* 8.88= $ 1296480
Actual Overhead- Applied Overhead= $1,301,980-$ 1296480= $5500
3-a)Underapplied overhead for the year= $ 5500
3-b) If the overhead is underapplied and it is corrected by increasing Cost of Goods Sold so it reduces net income. Similarly If the overhead is Overapplied and it is corrected by decreasing Cost of Goods Sold so it increases net income
