Question

Baab Corporation is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:

	Beginning Balance		Ending Balance
Raw materials	$	14,550​	$	22,550​
Work in process	$	27,550​	$	9550​
Finished Goods	$	62,550​	$	77,550​

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,550 machine-hours and incur $271,755 in manufacturing overhead cost. The following transactions were recorded for the year:

Raw materials were purchased, $315,550.

Raw materials were requisitioned for use in production, $307,550 ($280,450 direct and $27,100 indirect).

The following employee costs were incurred: direct labor, $377,550; indirect labor, $96,550; and administrative salaries, $172,550.

Selling costs, $147,550.

Factory utility costs, $10,550.

Depreciation for the year was $160,000 of which $144,000 is related to factory operations and $16,000 is related to selling, general, and administrative activities.

Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,110 machine-hours.

Sales for the year totaled $1,285,000.

Required:

Do not enter any commas (except for the pre-determined OH rate) and round to the nearest dollar

Based on the data presented above, complete the following Table

Pre-Determined OH Rate (round to 2 decimal places)	$
Direct Materials used in Production	$
Direct Labor	$377,550
Total Manufacturing Costs	$
Cost of Goods Manufactured	$
Adjusted Cost of Goods Sold	$
Total Selling and Admin Exp	$336,100
Operating Income	$

Answer 1

Solution:

Predetermined overhead rate = Estimated overhead / Estimated machine hours = $271,755/ 33550 = $8.10 per machine hour

Baab Corporation
Schedule of cost of goods manufactured
Particulars	Details	Amount
Direct Material:
Beginning material inventory	$14,550.00
Cost of material purchased	$315,550.00
Cost of material available	$330,100.00
Less: Ending material inventory	$22,550.00
Total material used	$307,550.00
Less: Indirect material used	$27,100.00
Direct material used		$280,450.00
Direct labor		$377,550.00
Manufacturing overhead applied (34110 * $8.10)		$276,291.00
Total manufacturing cost for the year		$934,291.00
Add: Beginning WIP		$27,550.00
Total cost of work in process during the year		$961,841.00
Less: Ending WIP		$9,550.00
Cost of goods manufactured		$952,291.00

Computation of Adjusted Cost of goods sold
Particulars	Amount
Cost of goods manufactured	$952,291.00
Add: Beginning finished goods inventory	$62,550.00
Less: Ending finished goods inventory	$77,550.00
Unadjusted cost of goods sold	$937,291.00
Add: Underapplied overhead ($27,100 + $96,550 + $10,550 + $144,000 - $276,291)	$1,909.00
Adjusted cost of goods sold	$939,200.00

Baab Corporation
Income Statement
Particulars	Details	Amount
Sales		$1,285,000.00
Cost of goods sold		$939,200.00
Gross Profit		$345,800.00
Selling and administrative expenses
Administrative salaries	$172,550.00
Selling Costs	$147,550.00
Depreciation Expense	$16,000.00
Total Selling and administrative expenses		$336,100.00
Net Income		$9,700.00