Neptune Fabrication Plant has provided you with the following information. $\begin{array}{c}
\begin{array}{|l|}
\hline \text {Total manufacturing overhead estimated at the beginning of the year}\
\hline \text {Total direct labor costs estimated at the beginning of the year }\
\hline \text {Total direct labor hours estimated at the beginning of the year }\
\hline \text {Actual manufacturing overhead costs for the year}\
\hline \text {Actual direct labor costs for the year}\
\hline \text {Actual direct labor hours for the year}\
\hline
\end{array}
\begin{array}{r|}
\hline\$ 250,000 \
\hline \$ 125,000 \
\hline 5,000 \text { direct labor hours } \
\hline \$ 240,000 \
\hline \$ 135,000\
\hline\text { 4,500 direct labor hours}\
\hline
\end{array}
\end{array}$
The company bases its manufacturing overhead allocation on direct labor hours. What was the unadjusted ending balance in the manufacturing overhead account?

Question

Neptune Fabrication Plant has provided you with the following information. $\begin{array}{c}
\begin{array}{|l|}
\hline \text {Total manufacturing overhead estimated at the beginning of the year}\
\hline \text {Total direct labor costs estimated at the beginning of the year }\
\hline \text {Total direct labor hours estimated at the beginning of the year }\
\hline \text {Actual manufacturing overhead costs for the year}\
\hline \text {Actual direct labor costs for the year}\
\hline \text {Actual direct labor hours for the year}\
\hline
\end{array}
\begin{array}{r|}
\hline\$ 250,000 \
\hline \$ 125,000 \
\hline 5,000 \text { direct labor hours } \
\hline \$ 240,000 \
\hline \$ 135,000\
\hline\text {  4,500 direct labor hours}\
\hline  
\end{array}
\end{array}$
 The company bases its manufacturing overhead allocation on direct labor hours. What was the unadjusted ending balance in the manufacturing overhead account?

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate using the estimated values:
Predetermined overhead rate = Total manufacturing overhead costs / Total estimated direct labor hours 
= $250,000 / 5,000 hours
= $50 per direct labor hour

Next, we can use this rate to allocate the manufacturing overhead costs for the actual direct labor hours worked:
Manufacturing overhead allocated = Predetermined overhead rate x Actual direct labor hours 
= $50 per hour x 4,500 hours 
= $225,000

The difference between the allocated overhead and the actual overhead is the amount that needs to be adjusted in the manufacturing overhead account:
Manufacturing overhead adjustment = Actual manufacturing overhead costs - Manufacturing overhead allocated 
= $240,000 - $225,000 
= $15,000 debit balance

Therefore, the unadjusted ending balance in the manufacturing overhead account is also $15,000 debit balance.

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