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Carera Corporation uses a predetermined overhead rate of $23
Carera Corporation uses a predetermined overhead rate of $23.10 per direct labour-hour. This predetermined rate was based on 12,000 estimated direct labour-hours and $277,200 of estimated total manufacturing overhead. The company incurred actual total manufacturing overhead costs of $296,000 and 12,600 total direct labour-hours during the period.
Required: 1. Determine the amount of manufacturing overhead applied to units of product during the period as well as the amount of over- or underapplied overhead for the period.
2. Prepare the journal entry to dispose of over- or underapplied overhead.
Note: Enter debits before credits.
Expert Solution
Requirement 1:
Predetermined overhead rate per hour = $23.10
Actual direct labor hours = 12,600
Amount of manufacturing overhead applied
= Predetermined overhead rate * Total Direct labor hours
= $23.10 * 12,600
= $291,060
Actual Manufacturing Overhead Costs = $296,000
Since Actual Manufacturing overhead cost is greater thatn that of manufacturing overheads applied, manufacturing overheads are said to be under-applied.
Under-appled manufacturing overheads
= Actual Manufacturing Overheads - Manufacturing Overheads applied
= $296,000 - $291,060
= $4,940
Requirement 2:
Journal Entry to dispose of under-applied overheads:
Cost of Goods Sold a/c Dr $4,940
To Manufacturing Overheads a/c $4,940
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