Calculate the amount of under applied overhead

Assignment Help Accounting Basics
Reference no: EM131083304

When overhead costs are incurred they are recorded in an Account titled Manufacturing Overhead Control Account. The account is debited for each overhead expense billed and an appropriate account such as Cash or Accounts Payable is credited. Since overhead costs cannot be traced directly to a cost object or to a Job, the total annual overhead cost for the coming year are estimated at the end of the preceeding year and a formula is used to estimate the amount of overhead that should be charged to each job or product. The amount charged to jobs or products is credited to the MOH account and debited to the Work In Process Account. This estimated amount is a surrogate for the actual overhead costs that are incurred during the year. At the end of the accounting period, the estimated amounts charged to all jobs or products may be higher or lower than the actual overhead costs incurred during the year. This situation gives rise to the phenomenon of Under /Over applied overhead. Since overhead expenses are just like ordinary expenses except for the fact that they are incorporated in the cost of product, then the MOH account is like any other temporary account and therefore it must be closed at the end of the accounting period.

Applied overhead is calculated using the following formula: Predetermined Overhead Application Rate (POHAR) x Actual consumption of the Activity Base. For example, if the POHAR is \$10 per direct labor hour consumed by a product and the product consumes 5 direct labor hours, then Applied Overhead would be: 10 X 5 = \$50. Under/ Over applied overhead is calculated as: Actual Overhead costs - Applied Overhead. If Actual is greater than applied then Overhead is described as under applied and if the Applied is greater than Actual then it is described as over applied.

Assignment:

The estimated overhead costs of Abel Furniture were \$2,200,000 and the estimated basis used for charging overhead to production is direct labor hours estimated at 500,000. The actual overhead incurred during the year was \$2,800,000 and the amount charged to production was \$2,400,000. Calculate the amount of Under/Over applied overhead and close the balance to Cost of Goods sold.

Questions Cloud

 Wide sense stationary process with autocorrelation function : X(t) is a wide sense stationary process with autocorrelation function Calculate the electrode potentials of the half-cells : Calculate the electrode potentials of the following half-cells. Find the autocorrelation of the output : The random sequence Xn is the input to a discretetime filter. The output is Construct a titration curve for these data : Generate a first- and second-derivative curve for these data. 43 Does the volume at which the second-derivative curve crosses zero correspond to the theoretical equivalence point? Why or why not? Calculate the amount of under applied overhead : The actual overhead incurred during the year was \$2,800,000 and the amount charged to production was \$2,400,000. Calculate the amount of Under/Over applied overhead and close the balance to Cost of Goods sold. New information systems security policy : You just defined a new information systems security policy for use of the organization's Internet connection and e-mail system in an acceptable use policy definition. Analyze each theory for its strengths and weaknesses : Choose three theories-a combination of classic and contemporary-that you have studied in this course, in addition to selecting three leaders who exemplify your chosen theories and three who are anti-exemplary. Making debt payments for at least the next year : Ngela owes \$500 on a credit card and \$2,000 on a student loan. The credit card has a 15 percent annual interest rate and the student loan has a 7 percent annual interest rate. Her sense of loss aversion makes her more anxious about the larger loan. S.. Determine the two financial ratios that you believe : Determine the two financial ratios that you believe to be the most important indicators of financial health for a company. Predict two positive or two negative financial outcomes should the chosen ratios change dramatically from one year to anothe..

Write a Review

Merchandise with an invoice price of 2000 was purchased on

merchandise with an invoice price of 2000 was purchased on october 3 terms 115 n60. the company uses the net method to

Identify internal control weaknesses

Identify account balances which are at risk of misstatement and identify two internal control weaknesses relating to each account balance identified

Fixed labor far north telecom ltd of ontario has organized

fixed labor far north telecom ltd. of ontario has organized a new division to manufacture and sell specialty cellular

Same day service purchased a new steam press on january 1

same day service purchased a new steam press on january 1 for35000. it is expected to have a five year useful life and

Price and constant growth rate of stock

Philly Corp's stock recently paid a dividend of \$2 per share (Do = \$2), and the stock is in equilibrium. The company has a constant growth rate of 5% and a beta of 1.5. The required rate of return on the market is 15%

Estimate the cost of construction for this project

Estimate the cost of construction for this project. Assume the estimates are fully loaded, ie they include labor, materials, applicable indirect costs such as overhead, etc

Laramie technologies had the following data cost of

laramie technologies had the following data cost of materials used 50000 direct labor costs 56000 factory overhead

Primary function of the job description paper

The primary function of the job description paper is to increase understanding of your current, or a prospective, position. The following areas of the job description should be considered:

During january 19000 units were completed and transferred

during january 19000 units were completed and transferred. at january 31st 6500 units remained in work in process that

What is the difference between reengineering

What is the difference between reengineering and continuous improvement?

Prepare a cash budget for each of the months october

randall company is a merchandising company that sells a single product. the companys inventories production and sales

Calculate the present value of plan a

Calculate the present value of Plan B. (Show all work) Axel will purchase the equipment that costs the least, as measured by present value. Which equipment should Axel select? Why?