Ramirez Company Uses a Predetermined Overhead Rate

question 7

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: 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:

Hierarchy of Motives

A structure that ranks human needs and motivations in order of importance, from basic physiological needs to self-actualization.

Maslow

Refers to Abraham Maslow, a psychologist best known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs in priority, culminating in self-actualization.

Sweet Taste

A sensation recognized primarily on the tongue, triggered by sugar and substances with a similar chemical structure.

Eating

The act of consuming food in order to provide nutritional support to the body.