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Mallet Company

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Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,100 of direct material cost, $2,600 of direct labor cost, and $1,850 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 71% of direct labor cost. Any underapplied or overapplied overhead cost is closed to Cost of Goods Sold at the end of the month.

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials):
Purchased during the month $29,600
Used in production $30,600

Labor:
Direct labor-hours worked during the month 2,600
Direct labor cost incurred $27,000
Indirect labor costs incurred $5,300

Manufacturing overhead costs incurred (total) $19,025

Inventories:
Raw materials (all direct) March 31 $8,300
Work in process, March 31 $13,900

Work in process inventory contains $5,300 of direct labor cost.

The entry to dispose of the underapplied or overapplied overhead cost for the month would include:

Manufacturing overhead costs incurred (total) $19,025
Less: Manufacturing overhead costs applied = 27,000 x 71% = $19,170
$ 145

a debit of $145 to Cost of Goods Sold

a debit of $5,300 to Manufacturing Overhead

a debit of $145 to Manufacturing Overhead

a credit of $5,300 to Cost of Goods Sold

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Solution Preview

Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,100 of direct material cost, $2,600 of direct labor cost, and $1,850 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 71% of direct labor cost. Any underapplied or overapplied overhead cost is ...

Solution Summary

This solution is comprised of a detailed explanation to prepare the entry to dispose of the underapplied or overapplied overhead cost for the month.

$2.19