Reference no: EM133139911
Question - Shumi Incorporated has decided to use a predetermined rate to assign factory overhead to production. The following predictions have been made for 2019:
Estimate total factory overhead costs $150,000
Estimate direct labor hours 20,000 DLH
Estimate direct labor costs $200,000
Estimate machine hours 60,000 MH
Actual direct labor hours 21,000 DLH
Actual direct labor costs $205,000
Actual machine hours 62,000 MH
Required -
a. Compute the predetermined factory overhead rate under three different bases: (1) direct labor hours, (2) direct labor costs, and (3) machine hours.
b. Assume that actual factory overhead was $154,000 and that Shumi Incorporated elected to apply factory overhead to Work in Process Inventory based on direct labor hours.
i. Was factory overhead over- or under-applied for 2019? How much?
ii. Give the journal entry to record the application of overhead.
c. Shumi Incorporated follows the policy of writing off any under- or over-applied Factory Overhead balance to Cost of Goods Sold at the end of the year. Give the journal entry necessary at the end of 2019 to dispose of the Factory Overhead balance determined in Part (b).
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