Question

I need help with this homework problem.

11:22 AM Fri Feb 28 3-04-WYOMING+Corporation+%28Flows%2C+job+ + A ... The following information comes from the accounting records of WYOMING CORPORATION manufacturer of custom coffee mugs, for its manufacturing activities for the year ended September 30 2018: Actual manufacturing overhead costs incurred: Indirect materials Indirect labor Property taxes - factory Utilities - factory Depreciation - factory Insurance factory $15.000 130,000 8.000 70,000 240.000 10,000 Total actual manufacturing overhead incurred $473,00 Other costs charged to jobs: Direct materials $375,00 0 60.000 Direct labor Inventory information: Work in process, beginning Work in process, ending Finished goods, beginning Finished goods, ending $40.000 70,000 120,000 135,000 The company uses a predetermined overhead rate to apply overhead to production on the basis of machine hours, since coffee-mug production is a highly automated process. Overhead for the year was originally budgeted at $475,000 and 19,000 machine hours were anticipated During the year, based on all of the jobs produced a total of 19.400 machine hours were recorded for the year REQUIRED 1. Why would the fact that production is highly automated have anything to do with the company's chose of machine hours as a basis for allocating overhead? WHY? 2. What was the predetermined overhead rate for the year?

Answer 1

1	Highly automated means that the company is depending more on machines than labor.
	Hence,machine hours will be the best basis for allocating overhead
2	Predetermined overhead rate=Estimated manufacturing overhead/Estimated machine hours=475000/19000=$ 25 per hour
3	Overhead applied=Actual machine hours used*Predetermined overhead rate=19400*25=$ 485000
4				Work in process
				Debit				Credit
	Beg. Bal			40000	Finished goods		(Plug)	890000
	Raw materials			375000	End. Bal			70000
	Wages payable			60000
	Overhead control		(Ref 3)	485000
				960000				960000
				Finished goods
				Debit				Credit
	Beg. Bal			120000	Cost of goods sold		(Plug)	875000
	Work in process			890000	End. Bal			135000
				1010000				1010000
				Overhead control
				Debit				Credit
	Raw materials			15000	Work in process			485000
	Wages payable			130000
	Property taxes payable			8000
	Utilities payable			70000
	Accumulated depreciation			240000
	Prepaid insurance			10000
				473000				485000
					End. Bal			12000
				Cost of goods sold
				Debit				Credit
	Finished goods			875000
				selling expenses
				Debit				Credit
	Cash			26000
				General and administrative expenses
				Debit				Credit
	Cash			40000
				Sales
				Debit				Credit
					Cash			1250000