Question

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Exercise 3-7 Applying Overhead; Cost of Goods Manufactured (LO3-3, LO3-4) The following cost data relate to the manufacturing activities of Chang Company during the just completed year. Manufacturing overhead costs incurred: Indirect materials Indirect labor Property taxes, factory Utilities, factory Depreciation, factory Insurance, factory Total actual manufacturing overhead costs incurred Other costs incurred: Purchases of raw materials (both direct and indirect) Direct labor cost Inventories: Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending $ 16,200 142,eee 9,280 82,000 169,900 11,200 $ 430,500 $ 412,000 $ 72,000 $ 21,200 $ 31,200 $ 41,200 $ 71,200 The company uses a predetermined overhead rate of $21 per machine-hour to apply overhead cost to jobs. A total of 20,900 machine-hours were used during the year. Required: 1. Compute the amount of underapplied or overapplied overhead cost for the year. 2. Prepare a schedule of cost of goods manufactured for the year. Complete this question by entering your answers in the tabs below.

Answer 1

Ans. 1	Overhead applied   = Predetermined overhead rate * Actual machine hours
	$21 * 20,900
	$438,900
	If the applied overhead is greater than the Actual overhead
	it means that the overhead is over applied.
	Over applied overhead = Overhead applied - Actual manufacturing overhead cost incurred
	$438,900 - $430,500
	$8,400
Ans. 2	Chang Company
	Schedule of Cost of Goods Manufactured
	Particulars	Amount	Amount
	Direct materials:
	Beginning raw materials inventory	$21,200
	Add: Purchase of raw materials	$412,000
	Raw materials available	$433,200
	Less: Ending raw materials inventory	-$31,200
	Raw materials used in production	$402,000
	Less: Indirect materials	-$16,200	$385,800
	Direct labor		$72,000
	Manufacturing overhead applied		$438,900
	Total manufacturing costs		$896,700
	Add: Beginning Work in process inventory		$41,200
	Less: Ending Work in process inventory		-$71,200
	Cost of goods manufactured		$866,700