Question

Exercise 3-7 Applying Overhead; Cost of Goods Manufactured (LO3-3, LO3-4] The following cost data relate to the manufacturing activities of Chang Company during the just completed year: $ 15,000 130,000 8,000 70,000 240,000 10,000 $ 473,000 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) Direct labor cost Inventories: Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending $ 400,000 $ 60,000 $ 20,000 $ 30,000 $ 40,000 $ 70,000 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

1) Applied overhead = 19400*25 = 485000

Actual overhead = 473000

Over applied overhead = 485000-473000 = 12000

2) Schedule of cost of goods manufactured

Direct material used
Beginning raw material	20000
Raw material purchase	400000
Raw material available for use	420000
Less: Ending raw material	-30000
Raw material used	390000
Less: Indirect material	-15000
Direct material used		375000
Direct labor		60000
Manufacturing overhead		485000
Total manufacturing cost		920000
Beginning work in process		40000
Total cost of work in process		960000
Less: Ending work in process		-70000
Cost of goods manufactured		890000