1.) Colby Company estimates that annual manufacturing overhead costs will be Php600,000.

Estimated annual operating activity bases are: direct labor cost Php460,000, direct labor hours
40,000 and machine hours 80,000. The actual manufacturing overhead cost for the year was
Php601,000 and the actual direct labor cost for the year was Php456,000. Actual direct labor
hours totaled 40,200 and machine hours totaled 79,000. Colby applies overhead based on direct
labor hours.

Instructions:

Compute the predetermined overhead rate and determine the amount of manufacturing overhead
applied. Determine if overhead is over- or underapplied and the amount.

The predetermined overhead rate = predetermined overhead rate / actual direc

600,000 / 40,000 direct labor hours = $15 per direct labor hour

The amount of manufacturing overhead applied = predetermined overhead rate * Actual direct labo

$15 * 40,200 = $603,000

The Actual manufacturing overhead cost for the year = $601,000

The amount of manufacturing overhead applied = $603,000

Overhead in Overapplied

Manufacturing Overhead
Actual costs: Applied costs:
$601,000 $603,000

Overapplied overhead = $601,000 - $603,000 = $2,000

2,) Martin Company applies manufacturing overhead based on direct labor hours. Information
concerning manufacturing overhead and labor for the year follows:

Instructions:

Compute the predetermined overhead rate.

The predetermined overhead rate = estimated manufacturing overhead / actual

 $140,000 / 5,000 = $28 per direct labor hour

3.) Croftmark Co. began operations on May 1, 2010. Its Work in Process Inventory account on May 31 appear

a. What was the predetermined overhead application rate?

Overhead rate = Overhead costs / Direct labor costs x 100

Overhead rate = 268,800 / 192,000 x 100

Overhead rate = 1.4 x 100 = 140%

Overhead application rate = 140%

b. What was the balance in WIP Inventory at the end of May?

Direct Materials 277,200

Direct Labor 192,000
Applied Overhead 268,800
WIP Ending Inventory 738,000

c. What was the total cost of jobs completed in May?

268,800 / 36,200 = 7.43

$7.43 * 36,200 = $268,966

Direct Materials 74,450

Direct Labor 36,200
Manufacturing Overhead 268,966
Total Cost Completed 379,616

4.) The manufacturing operations of Beatly, Inc. had the following balances for the month of January:

Instructions:
Compute the cost of goods sold for January.

Finished Goods Ending 12,000

Work In Process 240,000
Fnished Goods Beginning -14,000
Cost of Goods sold 238,000
5.) Farr Corporation had the following transactions during its first month of operations:

Instructions:

Journalize the above transactions for Farr Corporation.

1.) Purchased raw materials on account, $85,000.

Dr. Raw Materials Inventory $85,000

Cr. Accounts Payable 85,000

2.) Raw Materials of $30,000 were requisitioned to the factory. An analysis of the materia
requisition slips indicated that $6,000 was classified as indirect materials.

Dr. Work In Process Inventory 24,000

Dr. Manufacturing Overhead 6,000
Cr. Raw Materials Inventory 30,000

3.) Factory labor costs incurred were $125,000 of which $100,000 pertained to factory wa
payable and $25,000 pertained to employer payroll taxes payable.

Dr. Factory Labor 125,000

Cr. Factory Wages Payable 100,000
Cr. Employer Payroll Taxes Payable 25,000

4.) Time tickets indicated that $104,000 was direct labor and $21,000 was indirect labor.

Dr. Work in Process Inventory 104,000

Dr. Manufacturing Overhead 21,000
Cr. Factory Labor 125,000

5.) Overhead costs incurred on account were $112,000.

Dr. Manufacturing Overhead 112,000

Cr. Accounts Payable 112,000

6.) Manufacturing overhead was applied at the rate of 150% of direct labor cost.

Dr. Work in Process Inventory 156,000

Cr. Manufacturing Overhead 156,000
 ($104,000 x 150% = $156,000)

7.) Goods costing $135,000 are still incomplete at the end of the month; the other goods were
completed and transferred to finished goods.

Dr. Finished Goods Inventory 149,000

Cr. Work in Process Inventory 149,000
(24,000 + 104,000 + 156,000 = 284,000)
(284,000 - 135,000 = 149,000 )

8.) Finished goods costing $100,000 to manufacture were sold on account for $130,000.

Dr. Accounts Receivable 130,000

Cr. Sales Revenue 130,000
Dr. Cost of Goods Sold 100,000
Cr. Finished Goods Inventory 100,000

6.) During 2013, Arb Company incurred the following direct labor costs: January Php20,000 and
February Php30,000. Arb uses a predetermined overhead rate of 120% of direct labor cost.
Estimated overhead for the 2 months, respectively, totaled Php19,500 and Php35,700. Actual
overhead for the 2 months, respectively, totaled Php24,500 and Php32,500.

Instructions:

Determine if overhead is over- or underapplied for each of the two months and the respective amoun

Allocated Manufacturing Overhead = Estimated manufacturing overhead rate * Actual amount of alloca

Month 1:
Allocated Manufacturing Overhead = 20,000 * 1.2 = $24,000

Month 2:
Allocated Manufacturing Overhead = 30,000 * 1.2 = $36,000

Underapplied / Overapplied overhead = real overhead - allocated overhead

Month 1:
Underapplied / Overapplied Overhead = 24,500 - 24,000
Underapplied and Overhead = $500
Month 2:
Underapplied / Overapplied Overhead = 32,500 - 36,000
Overapplied Overhead = $3,500
costs will be Php600,000.
Php460,000, direct labor hours
erhead cost for the year was
p456,000. Actual direct labor
pplies overhead based on direct

t of manufacturing overhead

etermined overhead rate / actual direct labor hours

termined overhead rate * Actual direct labor hours

rect labor hours. Information

mated manufacturing overhead / actual direct labor hours

cess Inventory account on May 31 appeared as follows:

g balances for the month of January:

t month of operations:

factory. An analysis of the materials

ct materials.

h $100,000 pertained to factory wages

nd $21,000 was indirect labor.

% of direct labor cost.

of the month; the other goods were

sold on account for $130,000.

costs: January Php20,000 and

of 120% of direct labor cost.
p19,500 and Php35,700. Actual
d Php32,500.

two months and the respective amounts.

overhead rate * Actual amount of allocation base

ed overhead