ABC company uses a job-order costing
system. Direct materials and direct labor are traced to jobs. Manufacturing
overhead is applied to jobs on the basis of machine hours. At the start of the
year they had budgeted for overhead to be $316,000 and they planned to use
4,000 machine hours.
In November, job #JK150 was completed.
Materials used on job #JK 150 totaled $5,700 and the labor cost was $6,300. Job
#JK 150 had used 120 machine hours.
At the end of the year it was determined
that the company had incurred $320,000 of manufacturing overhead and that they
had worked 4,100 machine hours.
Prepare the journal entry to
transfer the cost of job #JK150 out of the work-in-process account at the end
What was the under-or over
recovered overhead for the year?
How would the under or over
recovered overhead be treated at the end of the year?
Why would they have chosen
machine hours as the basis for their predetermined overhead recovery rate?