Question

Budgeted sales revenue $ 205,000 Actual manufacturing overhead 364,000 Budgeted machine hours (based on practical capacity) 20,000 Budgeted direct-labor hours (based on practical capacity) 20,000 Budgeted direct-labor rate $ 13 Budgeted manufacturing overhead $ 336,000 Actual machine hours 11,000 Actual direct-labor hours 18,000 Actual direct-labor rate $ 16 Required: Prepare a journal entry to add to work-in-process inventory the total manufacturing overhead cost for the year, assuming: 1. The firm uses actual costing. 2. The firm uses normal costing, with a predetermined overhead rate based on machine hours. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

Work-In-Process   364,000 debit

    Factory Overhead     364,000 credit

--actual costing--

Work-In-Process   184,800 debit

    Factory Overhead      184,800 credit

--with a predetermined overhead rate--

Explanation:

If we do an actual costing then, we post into WIP the actual overhead cost.

If we do it with a predetermined overhead rate then:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

$336,000 expected overhead / 20,000 machine hours = $16.8

Now, the applied overhead will be this rate times the machine hours used:

$ 16.8  x 11,000 machine hours =  $  184,800