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		150,000
Fixed manufacturing overhead cost	$	653,000
Variable manufacturing overhead cost per machine-hour	$	4.90

Required:

1. Compute the predetermined overhead rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

2. During the year Job 500 was started and completed. The following information was available with respect to this job:

Direct materials requisitioned	$	350
Direct labor cost	$	260
Machine-hours used		36

Compute the total manufacturing cost assigned to Job 500. (Round your intermediate calculations and final answer to 2 decimal places.)

3-a. During the year the company worked a total of 145,200 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,346,600. What is the amount of underapplied or overapplied overhead for the year? (Round your intermediate calculations to 2 decimal places.)

3-b. If this amount were closed out entirely to Cost of Goods Sold, would net operating income increase or decrease?

      

	Increase
	Decrease

Answer 1

1
Predetermined overhead rate	9.25	=4.9+(653000/150000)
2
Direct materials requisitioned	350
Direct labor cost	260
Overhead applied	333	=36*9.25
Total manufacturing cost Job 500	943
3a
Actual manufacturing overhead	1346600
Less: Manufacturing overhead applied	1343100	=145200*9.25
Underapplied overhead	3500
3b
Net operating income would decrease.