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3) Hahn Company uses a job-order costing system
3) Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $15 per hour. During the year, the company started and completed only two jobs—Job Alpha, which used 54,500 direct labor-hours, and Job Omega. The job cost sheets for the these two jobs are shown below:
Job Alpha
Direct materials ?
Direct labor ?
Manufacturing overhead applied ?
Total job cost $1,533,500
Job Omega
Direct materials $235,000
Direct labor 345,000
Manufacturing overhead applied 184,000
Total job cost $764,000
Required:
1. Calculate the plantwide predetermined overhead rate.
2. Complete the remaining "?" on the Job Alpha sheet.
4) Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218,400 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours.
The company actually incurred $215,000 of manufacturing overhead and 11,500 direct labor-hours during the period.
Answer:
1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.
2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company's gross margin? By how much? Fill the blanks below:
I. Manufacturing overhead ( -increase/decrease- ) by ____________
II. The gross margin would (-increase/decrease )by ___________
Expert Solution
4-1) Computation of Amount of Underapplied or Overapplied Manufacturing Overhead for the Period:
Applied overhead = 11,500 * 18.20 = $209,300
Actual Overhead = $ 215,000
Overhead Is underapplied by $215,000 - $209,300 = $5,700
Underapplied overhead means the actual overhead incurred was more than the applied / allowed overhead. It is considered unfavourable.
4-2)
Please see the journal entry attached below.
So, we find that our expenses are increased as the Cost of goods sold is increased by $ 5700, therefore, our gross profit will reduce by 5700 and thus our net income will also reduce by $ 5700.
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