Question

Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year's operation of the company are presented below January 1 December 31 $ 96, 000 59,000 61,000 119,000 Direct materials Work in process Finished goods Other information Direct materials purchases Cost of goods available for sale Actual factory overhead costs 85,000 134,000 343,000 916,000 279,000 The amount of underapplied or overapplied overhead is

Answer 1

Answer

• The correct answer is Option #5 $ 69,000 Under Applied
• Workings

Beginning Direct Material	$96,000
Direct Material Purchases	$343,000
Ending Direct Material	($59,000)
Direct Material Used	$380,000

Cost of Goods available for sale	$916,000
Finished Goods Beginning Inventory	($134,000)
Cost of Goods transferred	$782,000

Cost of Goods transferred	$782,000
Ending WIP	$61,000
Beginning WIP	($85,000)
Direct Material Used	($380,000)
Direct Labor + Applied Overhead	$378,000

A	Direct Labor + Applied Overhead	$378,000
B	Direct Labor Cost [378000 / 225%]	$168,000
C = A - B	Applied Overhead	$210,000
D	Actual Overhead	$279,000
	Overheads are	Under-Applied
E = D - C	Under Applied by	$69,000