Erkens Company uses a job costing system with normal costing andapplies factory overhead on the basis of machine hours. At thebeginning of the year, management estimated that the company wouldincur $2,553,000 of factory overhead costs and use 69,000 machinehours.
Erkens Company recorded the following events during the month ofApril:
- Purchased 200,000 pounds of materials on account; the cost was$6.00 per pound.
Issued 130,000 pounds of materials to production, of which20,000 pounds were used as indirect materials.
- Incurred direct labor costs of $290,000 and $50,000 of indirectlabor costs.
Recorded depreciation on equipment for the month, $77,700.
Recorded expired insurance costs for the manufacturing property,$4,500.
Paid $9,500 cash for utilities and other miscellaneous items forthe manufacturing plant.
Completed Job H11 costing $8,500 and Job G28 costing $82,000during the month and transferred them to the Finished goodsinventory account.
Shipped Job G28 to the customer during the month. The job wasinvoiced at 30% above cost.
Used 9,700 machine hours during April.
Required:
1. Compute Erkens Company’s predetermined overhead rate for theyear.
2. Prepare journal entries to record the events that occurredduring April.
3-a. Compute the amount of overapplied or underappliedoverhead.
3-b. Prepare a journal entry to close overapplied orunderapplied overhead into cost of goods sold on April 30.
