Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $300,000 for the year, and machine usage is estimated at 125,000 of hours.

For the year, $322,000 of overhead costs are incurred and 130,0000 hours are used.

Instructions

1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under or over-applied overhead at December 31?
3. Prepare the adjusting entry to assign the under or over-applied overhead for the year to cost of goods sold.

Solution