Question

Bakerston Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Beginning Balance Ending Balance Raw materials $ 11,000 $ 15,400 Work in process $ 33,000 $ 14,100 Finished goods $ 109,000 $ 124,000 The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 17,400 machine-hours and incur $261,000 in manufacturing overhead cost. The following transactions were recorded for the year: • Raw materials were purchased, $412,000. • Raw materials were requisitioned for use in production, $407,600 ($383,000 direct and $24,600 indirect). • The following employee costs were incurred: direct labor, $336,000; indirect labor, $78,000; and administrative salaries, $154,000. • Selling costs, $113,000. • Factory utility costs, $20,000. • Depreciation for the year was $126,000 of which $113,000 is related to factory operations and $13,000 is related to selling, general, and administrative activities. • Manufacturing overhead was applied to jobs. The actual level of activity for the year was 14,500 machine-hours. • Sales for the year totaled $1,289,000. Required: a. Prepare a schedule of cost of goods manufactured in good form. (Do not round predetermined overhead rate. Input all amounts as positive values.) b. Was the overhead underapplied or overapplied? By how much? (Do not round predetermined overhead rate. Input the amount as a positive value.) c. Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold. (Input all amounts as positive values.)

Answer 1

t Dverheod undesapplied or Overapplie Actual manufacturing overhead. Cost incum ed 'n Indirect materials Indisect looour Fodtom utilities Factory depreciation Manufactuxinq overheod cost incumred33s,600 Manupactuming ovexhead apphed overhead is undesapplied noun 4,600 23000 3000 gloo C Tncome btatement Beginnina finished Qoeds inventoy10g000 Cest of qoods manufactured SSADO 10,64400 Goods asiailable for Cale ending finished goods inverdtory Urodjusted cost ofgoodls sold 49400 Deduck!-Undappied xvétapplied oerhead8 100 Adjusted Cost oPgbods sold Cast of goods sold Codjushed) 300 366900 eess. selling ond odminiełaatve enpenses Admimietoafive Salories Sa0o0 113000 asopo0 na Cos 13000 eprectation let Operating income 86700