Question

The manufacturing records for Krazy Kayaks at the end of the 2012 fiscal year show the following information about manufacturing overhead:Overhead allocated to production . . . . . . . . . . . . . . . . . . $ 405,900Actual manufacturing overhead costs . . . . . . . . . . . . . . . $ 428,000Overhead allocation rate for the year . . . . . . $ 41 per machine hourRequirements1. How many machine hours did Krazy Kayaks use in 2012?2. Was manufacturing overhead over- or under-allocated for the year and by how much?3. Prepare the journal entry to close out the over- or under-allocated overhead.

Answer 1

Please see explanation

Step-by-step explanation:

1. Machine hours used by Krazy Kayak are given as follows

Machine hours=Actual manufacturing overhead costs/cost per hour

=$428,000/41

=10,439 hours

2.Manufacturing overheads are underapplied because the actual overhead cost amounting to $428,000 is greater than applied overheads amounting to $405,900. The factory overheads are under applied by $22,100(428,000-405,900)

3. The journal entry to close out over or under allocated overhead are given as follows:

Debit Credit

Factory overheads applied $405,900.

Profit and loss account $22,100

Factory overheads Control $428,000