Supreme Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of
January 1, are given below.
Assets
Current assets: 78000
Cash
Accounts receivable.
Inventories:
Supreme Videos, Incorporated
Balance Sheet
January 1
Raw materials (film, costumes)
Videos in process
Finished videos awaiting sale
Prepaid insurance.
Total current assets
Studio and equipment
Less accumulated depreciation
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Capital stock
Retained earnings
Total liabilities and stockholders' equity
$ 45,000
23,000
96,000
760,000
225,000
$ 504,000
285,000
$ 78,000
117,000
164,000
12,000
371,000
535,000
$ 906,000
$ 117,000
789,000
$ 906,000
Because the videos differ in length and in complexity of production, the company uses a job-order costing system to determine the
cost of each video produced. Studio (manufacturing) overhead is charged to videos on the basis of camera-hours of activity. The
company's predetermined overhead rate for the year is based on a cost formula that estimated $270,000 in manufacturing overhead
for an estimated allocation base of 6,000 camera-hours. The following transactions occurred during the year:

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Supreme Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of
January 1, are given below.
Assets
Current assets: 78000
Cash
Accounts receivable.
Inventories:
Supreme Videos, Incorporated
Balance Sheet
January 1
Raw materials (film, costumes)
Videos in process
Finished videos awaiting sale
Prepaid insurance.
Total current assets
Studio and equipment
Less accumulated depreciation
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Capital stock
Retained earnings
Total liabilities and stockholders' equity
$ 45,000
23,000
96,000
760,000
225,000
$ 504,000
285,000
$ 78,000
117,000
164,000
12,000
371,000
535,000
$ 906,000
$ 117,000
789,000
$ 906,000
Because the videos differ in length and in complexity of production, the company uses a job-order costing system to determine the
cost of each video produced. Studio (manufacturing) overhead is charged to videos on the basis of camera-hours of activity. The
company's predetermined overhead rate for the year is based on a cost formula that estimated $270,000 in manufacturing overhead
for an estimated allocation base of 6,000 camera-hours. The following transactions occurred during the year:

Answer :

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KHURANASHILPA76GO KHURANASHILPA76GO · Answer 1

Manufacturing balance sheet is applied to production based on a pre-determined overhead rate which is calculated as follows:

Pre-determined overhead rate = Estimated total manufacturing overhead /Estimated allocation base

Given: Estimated manufacturing overhead = $270,000

Estimated allocation base (Estimated camera-hours) = 6,000

Pre-determined overhead rate = $270,000/6,000 = $45 per camera hour

Based on 7,800 actual camera hours,manufacturing overhead applied would be : $45 * 7,800 = $351,000

If the balance sheet amount of manufacturing overhead applied ($351,000), exceeds the amount of actual manufacturing overhead costs incurred ($335,625), the manufacturing overhead account will have a credit balance. This credit is described as overapplied overhead.

Thus, studio(manufacturing) overhead is overapplied by $15,375

The entry to close overapplied overhead to cost of goods sold is as follows:

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