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Question
The predetermined overhead allocation rate for Millay Manufacturing is based on estimated direct labor costs of $350,000 and estimated factory overhead of $770,000. Actual costs incurred were:
| Direct materials................................................................... | $475,000 |
| Direct labor................................................................... | 347,000 |
| Indirect materials................................................................... | 78,000 |
| Indirect labor................................................................... | 143,500 |
| Sales commissions................................................................... | 150,000 |
| Factory depreciation................................................................... | 260,000 |
| Property taxes, factory................................................................... | 35,000 |
| Factory utilities................................................................... | 65,000 |
| Advertising................................................................... | 62,500 |
| Factory supervision................................................................... | 185,000 |
a. Calculate the predetermined overhead rate and calculate the overhead applied during the year.
b. Determine the amount of over- or underapplied overhead and prepare the journal entry to eliminate the over- or underapplied overhead assuming that it is not material in amount.
Answer
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Related questions
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Although a fixed budget is only useful over the relevant range of operations, a flexible budget is useful over all possible production levels.
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