Solution-Underapplied or overapplied overhead

Underapplied or overapplied overhead

Reference no: EM13840768

(Underapplied or overapplied overhead) At year-end 2013, Dub's Wind Generator Co. had a $40,000 debit balance in its Manufacturing Overhead Control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year-end follows:

	Work in Process Inventory	Finished Inventory	Cost of Goods Sold
Direct material	$20,000	$ 80,000	$120,000
Direct labor	10,000	40,000	50,000
Factory overhead	20,000	80,000	100,000
	$50,000	$200,000	$270,000

a. What predetermined OH rate was used during the year?

b. Provide arguments to be used for deciding whether to prorate the balance in the overhead account at year-end.

c. Prorate the overhead account balance based on the relative balances of the appropriate accounts.

d. Identify some possible reasons that the company had a debit balance in the overhead account at year-end.

Reference no: EM13840768

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Underapplied or overapplied overhead : At year-end 2013, Dub's Wind Generator Co. had a $40,000 debit balance in its Manufacturing Overhead Control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year-end follows:

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Underapplied or overapplied overhead

Reference no: EM13840768

Reference no: EM13840768

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