### Compute company predetermined overhead application rate

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##### Reference no: EM13147971

Rockville, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3:

· Budgeted direct labor and manufacturing overhead were anticipated to be \$200,000 and \$250,000, respectively.

· Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor:

Job No. Direct Material Direct Labor Total

1 \$145,000 \$35,000 \$180,000

2 \$320,000 \$65,000 \$385,000 \$565,000

3 \$55,000 \$80,000 \$135,000

Total \$520,000 \$180,000 \$700,000

· Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production.

· Actual manufacturing overhead by year-end totaled \$233,000. Rockville adjusts all under- and overapplied overhead to cost of goods sold.

Required:

A. Compute the company's predetermined overhead application rate.

B. Compute Rockville's ending work-in-process inventory.

C. Determine Rockville's sales revenue.

D. Was manufacturing overhead under- or overapplied during 20x3? By how much?

E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end.

F. Does the presence of under- or overapplied overhead at year-end indicate that Rockville's accountants made a serious error? Briefly explain.

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