Calculate the under- allocation or over-allocation of overhead and record the journal entry to adjust the manufacturing overhead.

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Chapter 17, Problem 15TI

To determine

Calculate the under- allocation or over-allocation of overhead and record the journal entry to adjust the manufacturing overhead.

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Mountain Peaks applies overhead on the basis of machine-hours and reports the following information: What is the predetermined overhead rate? How much overhead was applied during the year? Was overhead over or underapplied, and by what amount? What is the journal entry to dispose of the over or underapplied overhead?

Sandar Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours Fixed manufacturing overhead cost Variable manufacturing overhead per computer-hour 90,000 $1,278,000 $5.30 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year ended 31 December 2019: Computer-hours 85,000 Purchase of raw materials $7,890,000 Direct labor cost $1,722,000 Manufacturing overhead costs: Insurance, factory ... $ 88,000 Depreciation of equipment 170,000 Indirect material . Indirect labor . 12,000 327,000 Property taxes 85,000 Maintenance. 630,000 Rent, building…

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