Question

The following cost data relate to the manufacturing activities of Chang Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials $ 17,000 Indirect labor 150,000 Property taxes, factory 10,000 Utilities, factory 90,000 Depreciation, factory 147,000 Insurance, factory 12,000 Total actual manufacturing overhead costs incurred $ 426,000 Other costs incurred: Purchases of raw materials (both direct and indirect) $ 420,000 Direct labor cost $ 80,000 Inventories: Raw materials, beginning $ 22,000 Raw materials, ending $ 32,000 Work in process, beginning $ 42,000 Work in process, ending $ 72,000 The company uses a predetermined overhead rate of $20 per machine-hour to apply overhead cost to jobs. A total of 21,700 machine-hours were used during the year. Required: 1. Compute the amount of underapplied or overapplied overhead cost for the year. 2. Prepare a schedule of cost of goods manufactured for the year.

Answer 1

Answer:

Part 1

under-applied overheads = $8,000

Part 2

Schedule of cost of goods manufactured for the year.

Opening Work in process                                            $ 42,000

Add Direct Materials                                                   $393,000

Add Direct Labor                                                          $ 80,000

Add Applied Overheads                                             $434,000

Less Ending Work In Process                                    ( $ 72,000)

Cost of Goods Manufactured                                     $877,000

Explanation:

The amount of underapplied or overapplied overhead cost for the year.

Applied Overheads = Predetermined overheads rate x Actual machine hours

                                 = $20 x 21,700 machine-hours

                                 = $434,000

Since,

actual manufacturing overhead costs = $ 426,000

and

applied manufacturing overhead = $434,000

then

under-applied overheads = $8,000 ($434,000 - $ 426,000)

Schedule of cost of goods manufactured for the year.

Opening Work in process                                            $ 42,000

Add Direct Materials ($ 22 + $ 420 - $ 32 - $ 17)      $393,000

Add Direct Labor                                                          $ 80,000

Add Applied Overheads                                             $434,000

Less Ending Work In Process                                    ( $ 72,000)

Cost of Goods Manufactured                                     $877,000