At the beginning of the year, Learer Company’s manager estimated total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager...


At the beginning of the year, Learer Company’s manager estimated total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager also estimated the following manufacturing overhead costs for the year.


At year-end, records show the company incurred $1,520,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $604,000; Job 202, $563,000; Job 203, $298,000; Job 204, $716,000; and Job 205, $314,000. In addition, Job 206 is in process at the end of the year and had been charged $17,000 for direct labor. No jobs were in process at the beginning of the year. The company’s predetermined overhead rate is based on direct labor cost.


Required


1. Determine the following.


a. Predetermined overhead rate for the year.


b. Total overhead cost applied to each of the six jobs during the year.


c. Over- or underapplied overhead at year-end.


2. Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of the year.



Nov 26, 2021
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