How do you calculate the overhead application rate?
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How do you calculate the overhead application rate?
Subway Inc uses traditional costing system, the manufacturing overhead is applied into production on the bases of Machine hours.
On September 1 2010 there were no Ending balances of work in process or finished goods inventories.
The following information was extracted from the company records:
1. Subway begun the following jobs during the month of September 2010:
• Job No. 001 2200 Machine hours.
• Job No. 002 4000 Machine hours.
• Job No. 003 2800 Machine hours.
2. Budgeted manufacturing overhead $309,000
3. Budgeted machine hours 61800 Hours.
4. Manufacturing overhead incurred during the month of September 2010 is totaled to $47,000
Requirements:
a) Calculate Subway predetermined overhead rate for the month of September 2010.
b) Calculate the manufacturing overhead applied to production during September 2010.
c) Calculate the over or under applied overhead for September 2010.
d) Prepare the journal entry to close the over or under applied overhead in to cost of goods sold.
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