Question

Pell Corporation is a company that manufactures computers. Assume that Pell: allocates manufacturing overhead based on machine hours estimated 9,000 machine hours and $ 90, 000 of manufacturing overhead costs actually used 15,000 machine hours and incurred the following actual costs: (click the icon to view the actual costs.) The company allocated manufacturing overhead of $150, 000 using a predetermined overhead rate of $ 10.00 per machine hour. The total actual manufacturing overhead costs are $84. What entry would Pell make to adjust the manufacturing overhead account for overallocated or underallocated overload?

Answer 1

Adjusting entry is given below

Step-by-step explanation:

DATA

Estimated Overhead = $150,000

Actual Overhead = $84,000

Under/Over allocated =?

Solution

Under/Over allocated Overhead = Estimated Overhead - Actual Overhead

Under/Over allocated Overhead = $150,000 - $84,000

Under/Over allocated Overhead = $66,000

We had over-allocated manufacturing overhead with $66,000

To adjust manufacturing Overhead account we should make the following entry

Entry DEBIT CREDIT

Manufacturing Overhead $66,000

Cost of goods sold $66,000