Suit UpSuit Up

produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses.

Suit UpSuit Up

reports the following cost data for the past year:

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(Click the icon to view the cost data.)

Read the requirements

Budget		Actual
Direct labor hours. . . . . . . . . . . . . . . . . . . . . . . . . . . .	7,400	hours	6,200	hours
Machine hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7,000	hours	6,400	hours
Depreciation on salespeople's autos. . . . . . . . . . .		$21,500		$21,500
Indirect materials. . . . . . . . . . . . . . . . . . . . . . . . . . . .		$51,000		$53,500
Depreciation on trucks used to deliver uniforms
to customers. . . . . . . . . . . . . . . . . . . . . . .		$16,000		$15,000
Depreciation on plant and equipment. . . . . . . . . . .		$66,000		$68,500
Indirect manufacturing labor. . . . . . . . . . . . . . . . . . . .		$42,000		$45,000
Customer service hotline. . . . . . . . . . . . . . . . . . . . . .		$21,000		$22,500
Plant utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$9,000		$10,500
Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$70,000		$86,000

PrintDone

.Suit Up

Suit Up

produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses.

Suit UpSuit Up

reports the following cost data for the past year:

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(Clickthe icon to view the cost data.)Read therequirements

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.

Requirement 1. Compute the predetermined manufacturing overhead rate.

Enter the formula for predetermined manufacturing overhead rate, then compute the rate.

/

=

Predetermined overhead rate

/

=

per machine hour

Requirement 2. Calculate the allocated manufacturing overhead for the past year.

						Manufacturing
		x			=	overhead allocated
		x			=

Requirement 3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of?

First calculate the preliminary manufacturing overhead balance using the T-account.

Manufacturing Overhead

Close the under- or overallocated overhead to Cost of Goods Sold by journalizing the entry. (Record debits first, then credits. Exclude explanations from any journalentries.)

Journal Entry
Date		Accounts	Debit	Credit

Requirement 4. How can managers use accounting information to help control manufacturing overhead costs?

To help control manufacturing overhead, managers compare the actual line item amounts for

with the budgeted amounts. Managers will also investigate only

differences between actual and budgeted amounts to identify the reasons why actual costs

are the same as planned or budgeted costs

are the same as previous years costs

differ from planned or budgeted costs

differ from previous years costs

.

Requirement 1. Compute the predetermined manufacturing overhead rate.

Enter the formula for predetermined manufacturing overhead rate, then compute the rate.

/

=

Predetermined overhead rate

/

=

per machine hour

Requirement 2. Calculate the allocated manufacturing overhead for the past year.

						Manufacturing
		x			=	overhead allocated
		x			=

Requirement 3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed of?

First calculate the preliminary manufacturing overhead balance using the T-account.

Manufacturing Overhead

Close the under- or overallocated overhead to Cost of Goods Sold by journalizing the entry. (Record debits first, then credits. Exclude explanations from any journalentries.)

Journal Entry
Date		Accounts	Debit	Credit

Requirement 4. How can managers use accounting information to help control manufacturing overhead costs?

To help control manufacturing overhead, managers compare the actual line item amounts for

with the budgeted amounts. Managers will also investigate only

differences between actual and budgeted amounts to identify the reasons why actual costs

are the same as planned or budgeted costs

are the same as previous years costs

differ from planned or budgeted costs

differ from previous years costs

.