Question

Kody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per machine-hour $ 156,000 658,000 4.30 Required: 1. Compute the predetermined overhead rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predetermined overhead rate Predetermined overhead per MH 2. During the year Job 500 was started and completed. The following information was available with respect to this job: $ 380 Direct materials requisitioned Direct labor cost Machine-hours used 220 37 Compute the total manufacturing cost assigned to Job 500. (Round your intermediate calculations and final answer to 2 decimal places.) Total manufacturing cost 3-a. During the year the company worked a total of 145,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,242,400. What is the amount of underapplied or overapplied overhead for the year? (Round your intermediate calculations to 2 decimal places.) Manufacturing overhead cost 3-b. If this amount were closed out entirely to Cost of Goods Sold, would net operating income increase or decrease? O Increase Decrease

Answer 1

Answers

• All working forms part of the Answer
• Requirement 1

Predetermined overhead rate = $ 8.52

A	Variable Overhead rate			$                              4.30
B	Total machine hours			156,000
C = A x B	Total Variable Overhead			$                670,800
D	Total Fixed Overheads			$                658,000
E = C+D	Total manufacturing Overhead			$            1,328,800
F	Total machine hours			156,000
G = E/F	Plant Wide Overhead rate			$                       8.52	Answer

• Requirement 2

Total manufacturing Cost = $ 915

Job500
Direct material cost	$                               380
Direct Labor cost	$                               220
Manufacturing Overhead	$                               315
Total manufacturing cost assigned	$                               915

• Requirement 3 [a]
  >Applied overhead = 145000 Mhs x $ 8.52 = $ 1235400
  >Actual Overhead = $ 1242400
  >Applied Overhead are LESS than Actual Overhead = Under Applied.

Manufacturing Overheads cost is UNDER – APPLIED by $ 7,000

• Requirement 3 [b]

Net Income would DECREASE, because its adjustment will increase the Cost of Goods Sold.