Question

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) $400,00e Direct labor cost Inventories: Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending $ 15,00e 130,e00 8,000 240,000 10,000 $473,00e $ 20,00e 30,000 $ 40,000e $ 70,00e The company uses a predetermined overhead rate of $25 per machine-hour to apply overhead cost to jobs. A total of 19,400 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.

Answer 1

Solution 1:

Applied Manufacturing Overhead = Predetermined overhead rate* Machine Hours used = $25* 19400 = $485,000

Actual Manufacturing Overhead = $473,000

Over-applied Overhead cost = Applied Overhead - Actual overhead = $485,000- $473,000 = $12,000

Solution 2:

Chang Company
Schedule of cost of goods manufactured
Direct Material:
Raw Material, Beginning	$20,000.00
Add: Purchase of Raw Material	$4,00,000.00
Total Raw material available	$4,20,000.00
Less: Raw Material, Ending	$30,000.00
Raw material used in production	$3,90,000.00
Less: Indirect Material	$15,000.00	$3,75,000.00
Direct Labor cost		$60,000.00
Applied Manufacturing Overhead		$4,85,000.00
Total Manufacturing Costs		$9,20,000.00
Add: Work in Process, Beginning		$40,000.00
Subtotal		$9,60,000.00
Less: Work in Process, Ending		$70,000.00
Cost of goods manufactured		$8,90,000.00