Question

Chapter 3 Handout Exercise ine following cost data relate to the manufacturing activities of Black Company during the just completed year: $ 3,000 5,000 10,000 24,000 6,000 $48,000 Manufacturing overhead costs incurred: Property taxes, factory...... Utilities, factory .... Indirect labor ............ Depreciation, factory...... Insurance, factory .......... Total actual manufacturing overhead costs.... · Other costs incurred: Purchases of raw materials. ... ... Direct labor cost ............ Inventories: Raw materials, beginning ... Raw materials, ending....... Work in process, beginning .. Work in process, ending .... $32,000 $40,000 $ 8,000 $ 7,000 $ 6,000 $ 7,500 The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $5 per machine-hour; a total of 10,000 machine-hours was recorded for the year. All raw materials ultimately become direct materials--none are classified as indirect materials. 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 using the indirect method.

Answer 1

1) Overhead applied = 10000*5 = 50000

Actual overhead = 48000

Over applied overhead = 50000-48000 = 2000

2) Schedule of cost of goods manufactured

Direct material used
Beginning raw material	8000
Raw material purchase	32000
Raw material available for use	40000
Less: Ending raw material	-7000
Direct material used		33000
Direct labor		40000
Overhead applied		50000
Total manufacturing cost		123000
Beginning work in process		6000
Total cost of work in process		129000
Less; Ending work in process		-7500
Cost of goods manufactured		121500