Question

Manufacturing overhead costs incurred Indirect materials Indirect labor Property taxes, factory Utilities, factory Depreciation, factoryy Insurance, factory $ 15,900 139,000 8,900 79,000 150,300 10,900 Total actual manufacturing overhead costs incurred $ 404,000 Other costs incurred: Purchases of raw materials (both direct and indirect) Direct labor cost $ 409,000 $ 69,000 Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending $ 20,900 $ 30,900 $ 40,900 $ 70,900 The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $20 per machine-hour. A total of 20,600 machine-hours was recorded for the year Required 1. Compute the amount of underapplied or overapplied overhead cost for the year d costS 11,000 2. Prepare a schedule of cost of goods manufactured for the year pany Schedule of Cost of Goods Manufactured Direct materials Raw materials available for use Raw materials used in production Total costs Cost of goods manufactured

Answer 1

1. Computation of the amount of underapplied or overapplied overhead cost for the year:

Applied overhead = predetermined overhead rate x machine hours

Predetermined overhead rate = $20

Machine hours = 20,600

Applied overhead = $20 x 20,600 MH = $412,000

Actual overhead costs incurred = $404,000

Since the actual overhead cost incurred is less than the applied overhead cost, the applied overhead is overapplied by $8,000 (412,000 – 404,000).

Hence, overapplied overhead cost = $8,000

1. Schedule of cost of goods manufactured for the year:

Schedule of Cost of Goods Manufactured
Beginning Work in Progress Inventory			$40,900
Manufacturing Costs:
Direct Materials used:
Beginning raw materials	$20,900
Add: Purchases	$393,100
Cost of direct materials available	$414,000
Less: ending raw materials	($30,900)
Cost of raw materials used		$383,100
Other Manufacturing Costs		$69,000
Total manufacturing costs			$452,100
Total cost of work in progress			$493,000
Less: ending work in progress			($70,900)
Cost of goods manufactured			$422,100

Note: the cost of purchases excludes cost of indirect materials. Hence, cost of purchase of direct raw materials = $409,000 – 15,900 = $393,100