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: Raw materials Work in process Finished goods Beginning Balance $ 11,600 $ 32,600 $102,000 Ending Balance $ 15,900 $ 14,300 $125,000 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, $410,000. Raw materials were requisitioned for use in production, $405,700 ($385,000 direct and $20,700 indirect). • The following employee costs were incurred: direct labor, $339,000; indirect labor, $74,000; and administrative salaries, $151,000. • Selling costs, $111,000. • Factory utility costs, $24,000. • Depreciation for the year was $129,000 of which $111,000 is related to factory operations and $18,000 is related to selling, general, and administrative activities. • Manufacturing overhead was applied to jobs. The actual level of activity for the year was 14,300 machine-hours. • Sales for the year totaled $1,284,000. 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.)

Answer 1

Answer -

a. Answer -

Bakerston Company
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$11600
Add: Raw materials purchased	$410000
Total raw materials available	$421600
Less: Ending raw materials inventory	($15900)
Raw materials used in production	$405700
Less: Indirect material included in manufacturing overhead	($20700)	$385000
Direct labor		$339000
Manufacturing overhead cost applied to work in process		$214500
Total manufacturing cost		$938500
Add: Beginning work in process inventory		$32600
		$971100
Less: Ending work in process inventory		($14300)
Cost of goods manufactured		$956800

Calculation:

Predetermined overhead rate:

= Estimated manufacturing overhead / Estimated machine-hours

= $261000 / 17400 machine-hours

= $15

Manufacturing overhead applied:

= Actual machine-hours * Predetermined overhead rate

= 14300 machine-hours * $15

= $214500

b. Answer -

Manufacturing overhead

Underapplied

$15200

Calculation:

Actual Manufacturing overhead cost incurred:

= Indirect materials + Indirect labor + Factory utilities + Factory depreciation

= $20700 + $74000 + $24000 + $111000

= $229700

But,

Manufacturing overhead applied = $214500

Therefore,

Manufacturing overhead is under applied.

Under applied overhead:

= Actual Manufacturing overhead cost incurred - Manufacturing overhead applied

= $229700 - $214500

= $15200