Data provided:
Estimated manufacturing overhead cost for year....$93,000
Estimated direct labor cost for the year... $75,000
Actual manufacturing overhead cost for the year... $84,000
Actual direct labor cost for the year... $64,000
Requirements: 1. Compute the predetermined manufacturing overhead rate per direct labor dollar.
2. Prepare the journal entry to allocate overhead cost for the year
3. Use a T account to determine the amount of underallocated for manufacturing overhead
4. Make a journal entry to close manufacturing overhead account
it is right
Sure! Let's go through each requirement step by step.
1. Computing the predetermined manufacturing overhead rate per direct labor dollar:
To calculate the predetermined manufacturing overhead rate, you need to divide the estimated manufacturing overhead cost for the year by the estimated direct labor cost for the year.
Predetermined Manufacturing Overhead Rate = Estimated Manufacturing Overhead Cost / Estimated Direct Labor Cost
Using the given data:
Estimated manufacturing overhead cost for the year = $93,000
Estimated direct labor cost for the year = $75,000
Predetermined Manufacturing Overhead Rate = $93,000 / $75,000 = 1.24
Therefore, the predetermined manufacturing overhead rate per direct labor dollar is 1.24.
2. Preparing the journal entry to allocate overhead cost for the year:
The journal entry to allocate overhead cost is typically recorded in the Manufacturing Overhead Control account. Assuming all the actual overhead cost for the year is allocated, the journal entry would be as follows:
Debit: Manufacturing Overhead Control - $84,000
Credit: Accounts Payable (or Cash) - $84,000
This entry records the actual manufacturing overhead cost of $84,000 in the Manufacturing Overhead Control account.
3. Using a T account to determine the amount of underallocated manufacturing overhead:
To determine the amount of underallocated manufacturing overhead, you would compare the allocated manufacturing overhead with the actual manufacturing overhead.
Using the given data:
Allocated manufacturing overhead = Predetermined Manufacturing Overhead Rate x Actual Direct Labor Cost
= 1.24 x $64,000 = $79,360
Actual manufacturing overhead = $84,000
Underallocated Manufacturing Overhead = Actual Manufacturing Overhead - Allocated Manufacturing Overhead
= $84,000 - $79,360 = $4,640
So, the amount of underallocated manufacturing overhead is $4,640.
4. Making a journal entry to close the manufacturing overhead account:
At the end of the year, the Manufacturing Overhead Control account is closed and any underallocated or overallocated overhead is adjusted. In this case, since there is underallocated manufacturing overhead, we need to adjust the Manufacturing Overhead Control account accordingly.
The journal entry to close the Manufacturing Overhead Control account would be as follows:
Debit: Cost of Goods Sold - $4,640
Credit: Manufacturing Overhead Control - $4,640
This entry transfers the underallocated manufacturing overhead to the Cost of Goods Sold account, reducing the profit by the underallocated amount.
Remember to consult with your accountant or financial advisor for the best practices in your specific situation.