Question

1. Compute a predetermined overhead rate.
2. Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement.
3. Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

Says 'all answers must be entered as a formula'

1. Compute a predetermined overhead rate. 2. Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. 3. Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts. All answers must be entered as a formula. Click OK to begin. OK

Answer 1

Ans.

1. Predetermined Overhead rate = Estimated Manufacturing Overhead / Estimated Direct Labor Hours = $275,000 / 25000 = $11 per direct labor hour

Computation of applied overhead and determination of underapplied or overapplied overhead

Actual Manufacturing Overhead Cost (a)		$ 302,750.00
Predetermined Overhead Rate (b)	$          11.00
Actual Direct Labor Hours ©	27,760.00
Manufacturing Overhead applied (d = b * c)		$ 305,360.00
Underapplied (Overapplied) manufacturing Overhead (e = a-d)		$    (2,610.00)

2. Prepare schedules of cost of goods manufactured

Stanford Enterprises
Schedule of Cost of Goods Manufactured
Direct materials
Beginning raw materials inventory (a)	$    15,000.00
Add: Purchases of raw materials (b)	$ 375,000.00
Total raw materials available (c= a+b)	$ 390,000.00
Deduct: Ending raw materials inventory( d)	$    11,375.00
Raw materials used in production (e = c-d)		$      378,625.00
Direct labor (f)		$      536,300.00
Manufacturing overhead applied to work in process (g)		$      305,360.00
Total manufacturing costs (h = e + f + g)		$ 1,220,285.00
Add: Beginning work in process inventory (i)		$        27,875.00
Total Cost of work in proces (j= h+i)		$ 1,248,160.00
Deduct: Ending work in process inventory (k)		$        22,350.00
Cost of goods manufactured (l = j-k)		$ 1,225,810.00

2. Prepare schedules of cost of goods sold

Stanford Enterprises
Schedule of Cost of Goods Sold
Finished goods inventory,Beginning (a)	$        34,600.00
Add: Cost of goods manufactured (b)	$ 1,225,810.00
Cost of goods available for sale (c= a+b)	$ 1,260,410.00
Deduct: Finished goods inventory,Ending ( d)	$        26,450.00
Unadjusted cost of goods sold (e= c-d)	$ 1,233,960.00
Underapplied (Overapplied) overhead (f)	$        (2,610.00)
Adjusted cost of goods sold (g = e+f)	$ 1,231,350.00

2. Income Statement

Stanford Enterprises
Income Statement
Sales (a)	NA
Less: Cost of goods sold (b)	$ 1,231,350.00
Gross margin (c = a-b)		NA
Less: Selling and administrative expenses Selling expenses (d)	NA
Net Operating Income (e = c -d)		NA

As the information is not available in question i write NA.

3.

Computation of applied overhead and determination of underapplied or overapplied overhead

Actual Manufacturing Overhead Cost (a)		$ 302,750.00
Predetermined Overhead Rate (b)	$          11.00
Actual Direct Labor Hours (c)	27,760.00
Manufacturing Overhead applied (d = b * c)		$ 305,360.00
Underapplied (Overapplied) manufacturing Overhead (e = a-d)		$    (2,610.00)

Prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts

Date	Particulars	Debit	Credit
	Manufacturing Overhead	$          2,610.00
	Cost of Goods Sold		$          2,610.00