.- ufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor-hours. Under- or overal- located overhead, if immaterial, is written off to Cost of Goods Sold. During 2017, Creative recorded the following: Budgeted manufacturing overhead costs Budgeted direct labor-hours Actual manufacturing overhead costs Actual direct labor-hours $4,140,000 180,000 $4,337,000 189,000 Required 1. Compute the budgeted manufacturing overhead rate. 2. Prepare the summary journal entry to record the allocation of manufacturing overhead. 3. Compute the amount of under- or overallocated manufacturing overhead. Is the amount significant enough to warrant proration of overhead costs, or should Creative Woodworking write it off to cost of goods sold? Prepare the journal entry to dispose of the under- or overallocated overhead.

A. Budgeted Manufacturing Overhead = $4,140,000

and Budgeted direct labour hours = 180,000 hrs

Therefore, Budgeted direct labour hourly rate = $4,140,000/180,000hrs

= $23/hr

B. Journal entry to record the allocation of manufacturing Overhead is:

=$23/hr x 189,000 hrs

=$4,347,000

Dr. Cost of Goods Sold with $4,347,000

Cr. Direct Labor Wage Payable with $4,347,000

C. Over allocation = $10,000

The Amount is small to warrant a proration of overhead costs. Creative Woodworking should go ahead and write it off to Cost of Goods Sold in the year.

Explanation:

Creative Wood allocates manufacturing overheads to Jobs based on "Budgeted labour hour rate x Actual Labour Hours"

In 2017

A. Budgeted Manufacturing Overhead = $4,140,000

and Budgeted direct labour hours = 180,000 hrs

Therefore, Budgeted direct labour hourly rate = $4,140,000/180,000hrs

= $23/hr

Actual Manufacturing Overhead however is $4,337,000

and Actual Hours worked by direct labor is 189,000 hrs

Thus Actual Hourly rate for direct labour = $4,337,000/189,000hrs

=$22.947/hr

B. Journal entry to record the allocation of manufacturing Overhead is:

=$23/hr x 189,000 hrs

=$4,347,000

Dr. Cost of Goods Sold with $4,347,000

Cr. Direct Labor Wage Payable with $4,347,000

C. Determination of Under or Over allocated Overhead

Allocated Overhead to Cost of Goods sold = $4,347,000

Actual allocation due to Cost of Goods sold= $4,337,000

Over allocation = $10,000

urban company reports the following information regarding its production cost: units produced 37,000 units direct labor $ 30 per unit direct materials $ 35 per unit variable overhead $ 237,000 in total fixed overhead $ 127,000 in total

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