4.1.PNG - Exercise 7-20 Predetennined Overhead Rates(LO T-3...

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Unformatted text preview: Exercise 7-20 Predetennined Overhead Rates (LO T-3) Southern Rim Parts estimates its manufacturing overhead to be $495,000 and its direct labor costs to be $900,000 forvear 1. The first three jobs that Southern Rim worked on had actual direct labor costs of $20,000 for Job 301, $30,000 for Job 302, and $40,000 for Job 303. For the year, actual manufacturing overhead was $419,000 and total direct labor cost was $850,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates. Required: a. How much overhead was assigned to each of the threejobs, 301, 302, and 303‘? Job 301 $ 11,000 Job 302 15,500 Job 303 22,000 in. mm was the over- or underapplied manufacturing overhead for year 1? Explanation: a. _ . _ $495,000 _ . Applrcatron rate. —$900,000 — 55% of direct labor Job 301: $ 20,000 x .55 = $11,000 Job 302: 30,000 x .55 = 15,500 Job 303: 40,000 x .55 = 22,000 $49,500 '— b. Total manufacturing overhead applied is $46?,500 (= $850,000 x 0.55) Underapplied overhead is $11,500 {= $4?9,000 — $451500). ...
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