Question

2.

Moody 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		158,000
Fixed manufacturing overhead cost	$	650,000
Variable manufacturing overhead cost per machine-hour	$	4.40

Required:

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

     

2.	During the year, Job 400 was started and completed. The following information was available with respect to this job:

   

Direct materials requisitioned	$	310
Direct labor cost	$	240
Machine-hours used		35

	Compute the total manufacturing cost assigned to Job 400. (Do not round intermediate calculations and round final answer to 2 decimal places.)

     

3-a.	During the year the company worked a total of 146,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,246,960. What is the amount of underapplied or overapplied overhead for the year? (Use the overhead rate determined in requirement 1.)

       

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. Fixed manufacturing Overhead Cost = $650,000 Variable manufacturing overhead Cost = $4.40 x 158,000 = $695,200 Total manufacturing overhead Cost = $650,000+ $695,200 = $1,345,200 - predetermined overhead tate = $1,345,200 158,000 = $8.50 per machine-hour Amount $310 240 Job noo Direct materials Direct Labor Overhead applied (18.51835 Total manufacturing Cost 298 848

a. Actual manufacturing overhead Cost&= $1,246,960 Applied manufacturing overhead Cost &= $ 1,242,460 [146,000 $2.51] - $1,246,960 - $1,242,460 = $4,500 Underapplied b. Decrease. [Cost of goods sold increases, so operating income decreases