84) IIF Industries uses a job-order costing system and applies overhead on the basis of direct labour hours. 

At the beginning of 2006, management estimated that 200,000 direct labour hours would be worked and $600,000 of overhead costs would be incurred.

During the year, the company actually worked 220,000 direct labour hours and incurred the following manufacturing costs:

Indirect labour$140,000

Indirect materials100,000



Repairs & maintenance80,000


Direct materials used in production540,000

Direct labour700,000

a. Calculate the budgeted factory overhead application rate for 2006.

b. Determine the amount of manufacturing overhead applied to work in process during 2006.

c. Determine the amount of underapplied or overapplied overhead for the year.

d. If goods with a cost of $1,500,000 were completed and transferred to finished goods during 2006, determine the cost of work in process at the end of the period.

e. Prepare the journal entry to close underapplied or overapplied overhead to cost of goods sold.

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