Question

Cadbury Company uses a job order costing system. Manufacturing overhead is applied on the basis of direct labor cost. Total manufacturing overhead was estimated to be $144,020 for the year; direct labor was estimated to total $151,600.

	(1/1)			(12/31)
Raw Materials Inventory	$	14,400		$	9,900
Work in Process Inventory	$	19,300		$	22,100
Finished Goods Inventory	$	42,400		$	30,600

The following transactions have occurred during the year.

Raw materials purchases	$	110,000
Direct materials used	$	103,100
Direct labor	$	127,500
Indirect materials used	$	11,400
Indirect labor	$	16,100
Factory equipment depreciation	$	26,600
Factory rent	$	21,300
Factory utilities	$	8,600
Other factory costs	$	7,600

a) Calculate the predetermined overhead rate

	Predetermined Overhead Rate    %

(b) Calculate cost of goods manufactured.

	Cost of Goods Manufactured

c) Calculate the over- or underapplied overhead. (Input the amount as positive value.)

(d) Calculate adjusted cost of goods sold

	Adjusted Cost of Goods Sold

Answer 1

A.Predetermined overhead rate = total manufacturing overhead/ direct labor hours 144020/151600=		95%
B
Cost of Goods manufactured
Direct materials:
Material used in production		103100
Direct labor		127500
Manufacturing overhead applied( on direct labor(127500*95%))		121125
Add: Beginning Work in process		19300
Less: Ending Work in process		22100
Cost of goods manufactured		348925
C
Overhead Underapplied = (Actual manufacturing overhead - Estimated manufacturing overhead) refer Working note at End. (11400+16100+26600+21300+8600+7600)=91600-121125			29525
D
Cost of goods manufactured		348925
Add: Beginning Finished inventory		42400
Cost of goods available for sale		391325
Less: Ending finished inventory		30600
Cost of Goods Sold		360725
Add: Underapplied overhead		29525
Adjusted Cost of Goods Sold		390250
Working note:
Total actual overhead
Indirect materials used	$	11,400
Indirect labor	$	16,100
Factory equipment depreciation	$	26,600
Factory rent	$	21,300
Factory utilities	$	8,600
Other factory costs	$	7,600
Total		91600