(Question and Answer): EXERCISES 1. Ikerd Company applies manufacturing overhead to units on the basis of machine hours used. During the m

EXERCISES 1. Ikerd Company applies manufacturing overhead to units on the basis of machine hours used. During the month, $325,000 of actual overhead costs were incurred and 130,000 actual machine hours were used.

Instructions a. Give the general journal entry required to record the incurrence of the actual overhead costs. Assume that all of the overhead costs were paid in cash.

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b. Compute the actual overhead rate for the month.

c. During the month, five different units were in production and each unit had the following machine hour usage: Unit #1: 18,000 machine hours Unit #2: 35,000 machine hours Unit #3: 24,000 machine hours Unit #4: 27,000 machine hours Unit #5: 26,000 machine hours Compute the amount of overhead that should be applied to each unit.

d. What total amount of overhead has been applied during the month? e. Give the general journal entry required to apply the overhead costs to production for the month.

Expert Answer

 

(A) General Entry on incurrance of Overhead Cost like Rent, Power:-

Manufacturing Overhead A/c Dr. 325,000

Particular Expenses A/c Cr. 325,000

(B) Actual Overhead Rate = Actual overhead cost/Actual Machine Hours

= 325,000/130,000

= $ 2.5 per machine hour

(C) Allocation of the Total Overhead to each unit:-

Unit No. Machine Hour Usages Overhed Allocated($)
1 18000 45000
2 35000 87500
3 24000 60000
4 27000 67500
5 26000 65000
Total 130000 325000

(D)

General Entry to apply Overhead Cost to production:-

Account Debit Credit

Work in process 325,000

Manufacturing Overhead 325,000

Total 325,000 325,000

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