Question

The following cost data relate to the manufacturing activities of Chang Company during the just completed year:

Manufacturing overhead costs incurred:
Indirect materials	$	15,000
Indirect labor		130,000
Property taxes, factory		8,000
Utilities, factory		70,000
Depreciation, factory		240,000
Insurance, factory		10,000
Total actual manufacturing overhead costs incurred	$	473,000
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	400,000
Direct labor cost	$	60,000
Inventories:
Raw materials, beginning	$	20,000
Raw materials, ending	$	30,000
Work in process, beginning	$	40,000
Work in process, ending	$	70,000

The company uses a predetermined overhead rate of $25 per machine-hour to apply overhead cost to jobs. A total of 19,400 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

1. Compute applied overhead and determine underapplied or overapplied: $473,000 $ Actual Manufacturing overhead cost Predetermined overhead rate Multiply Actual Machine Hours Used Manufacturing overhead applied Overapplied Overhead Cost 25 19400 $ 485,000 $ 12,000 Manufacturing Oh applied = Predetrmined Oh Rate x Actual machine hour. 2. Schedule of Cost of Goods Manufactured. Chang Enterprises Cost of goods Manufactured Direct Material :- Raw Material Inventory, Beginning Add: Purchase of raw material Raw material Available for use less: Raw Material Inventory, Ending Raw Material used in production Less: Indirect Material Direct labor Manufacturing Overhead applied to WIP Total Manufacturing cost Add: work in process, Beginning $ 20,000 $ 400,000 $ 420,000 $ 30,000 $ 390,000 $ 15,000 $375,000 $ 60,000 $ 485,000 $ 920,000 $ 40,000 $ 960,000 $ 70,000 $ 890,000 Less: work in process, Ending Cost of goods manufactured