Ramirez Company Uses a Predetermined Overhead Rate Required:
(1) Calculate the Over/under-Applied Overhead for the Year

question 11

Essay

Ramirez Company uses a predetermined overhead rate.Overhead for the next twelve months is estimated to be $500,000.Ramirez applies overhead as a percentage of direct labor cost.Direct labor costs are estimated to be $625,000 for the next year.During the year actual direct labor costs amounted to $600,000 and the actual overhead was as follows: $$\begin{array} { l r } \text { Maintenance } & \$ 50,000 \\\text { Indirect materials } & 25,000 \\\text { Indirect labor } & 80,000 \\\text { Factory Rent } & 90,000 \\\text { Depreciation } & 70,000 \\\text { Payroll taxes } & 80,000 \\\text { Other } & \underline { 80,000 } \\\text { Total } & \$ 475,000\end{array}$$ Required:
(1) Calculate the over/under-applied overhead for the year.
(2) Prepare the journal entry to close the overhead accounts, assuming that the over/under-applied overhead is closed to cost of goods sold.

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Definitions:

The Future

An undefined period of time that has yet to occur, often considered in terms of the potential for positive or negative events.

Alcoholism

A chronic disease characterized by uncontrolled drinking and a preoccupation with alcohol.

Indirectly Affected

To be impacted by an action, event, or situation in a secondary or less immediate way.

Communication

The act of conveying information or expressing ideas and feelings through verbal, nonverbal, written, or visual means.