Question

The following information applies to the O’Donnell Company for March ­production. There are only two jobs (X and Y) in production in March. Purchased direct materials and indirect materials with the following summary of receiving reports: Material A $ 16,000 Material B 12,000 Indirect materials 3,000 Total $ 31,000 Issued direct materials and indirect materials with this summary of requisitions: Job X Job Y Total Material A $ 8,000 $ 16,000 $ 24,000 Material B 3,000 8,000 11,000 Subtotal $ 11,000 $ 24,000 $ 35,000 Indirect materials 39,000 Total $ 74,000 Factory labor incurred is summarized by these time tickets: Job X $ 22,000 Job Y 15,000 Indirect labor 28,000 Total $ 65,000 Factory utilities, factory depreciation, and factory insurance incurred is summarized as follows: Utilities $ 3,000 Depreciation 18,000 Insurance 2,500 Total $ 23,500 Factory overhead costs were applied to jobs at the predetermined rate of $46 per machine hour. Job X incurred 1,100 machine hours; Job Y used 800 machine hours. Job X was completed; Job Y was still in process at the end of March. The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of March. Required: 1. Calculate the total manufacturing cost for Job X and Job Y for March. 2. Calculate the amount of overapplied or underapplied overhead and state whether the Cost of Goods Sold account will be increased or decreased by the adjustment.

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer 2 Parta) Manufacturing Cost 4 Particular Job X Job Y 5 Material A 8000 16000 6 Material B 3000 8000 7 Factory Labour 22000 15000 8 Factory Overhead Cost 50600 36800 9 Total Manufacturing Cost 8360075800 10 11 Part b) 12 Amount of overheads underapplied or (overapplied) 13 = actual overheads - applied overheads 14 = (39000+28000+3000+18000+2500) - (50600+36800) 15 = $ 3100 17 The underapplied overheads are $ 3100 19 Due to this cost of goods sold will be increased, in order to absorb underapplied overheads.