Question

Calculate and dispose of overapplied or underapplied manufacturing overhead. Calculate the cost of goods manufactured and cost of goods sold. Prepare an income statement for a manufacturing firm.

Answer 1

Answer:

hello your question is incomplete attached is the complete question and solution

a) Overhead is over applied

b) cost of goods manufactured = $1,225,810

c) net operating income : $118650

Explanation:

A) Predetermined overhead rate   =   Estimated total overhead cost / Estimated total direct labor hours  

$275,000 / 25,000 =  

$11 per direct labor hour    

Overhead applied = Actual direct labor hours * Predetermined overhead rate  

27,760 * $11 =  $305,360  

Over applied overhead =   Overhead applied - Actual overhead  $305,360 - $302,750  =  $2,610  

since the applied overhead is greater than the Actual overhead    then the overhead is over applied.    

B) STANFORD   ENTERPRISES  

Cost of Goods Manufactured Report  

Particulars                                              Amount      Amount  

Direct materials:    

Beginning raw materials inventory $15,000  

Add: Purchase of direct materials $375,000  

Raw materials available                 $390,000  

Less: Ending raw materials inventory -$11,375  

Direct materials used                          $378,625       $378,625  

Direct labor                                                                $536,300  

Manufacturing overhead applied                             $305,360  

Total manufacturing costs                                        $1,220,285  

Add: Beginning Work in process inventory            $27,875  

Less: Ending Work in process inventory                -$22,350  

Cost of goods manufactured                                 $1,225,810  

C) INCOME STATEMENT OF STANFORD   ENTERPRISES  

Income    Statement  

Particulars                                                   Amount          Amount  

Sales revenue                                                               $1,500,000  

Less: Cost of goods sold:    

Finished goods inventory, beginning       $34,600  

Plus: Cost of Goods Manufactured          $1,225,810  

Less: Ending finished goods inventory -$26,450  

Unadjusted Cost of goods sold               $1,233,960  

Less: Overhead applied                         -$2,610  

Adjusted cost of goods sold                                          $1,231,350  

Gross profit                                                                    $268,650  

Less: Selling, Gen. & Admin. Expenses

($1,500,000 * 10%)                                                           $150000

net operating income                                                     $118650