Question

2. MD Manufacturing has the following beginning and end acturing has the following beginning and ending account balances Beginning Balance Ending Balance Raw Materials $26,000 $33,000 Work-in-Process $64,000 $71,000 Finished Goods Inventory $48,000 $45,000 uses normal costing, MD allocates overhead based on machine hours. At the beginning of the year, MD estimated overhead for the year to be $200.000 and machine hours to be 2,500 hours. Actual machine hours during the vear was 2,700 and actual overhead incurred was $430,000. Purchases of raw materials for the year were $250,000 and actual direct labor hours were 4,200 hours. Direct labor costs $40 per hour. A. What is the Cost of Goods Manufactured and Cost of Goods Sold (prior to any over- or under- allocated overhead adjustment)? B. By how much was the manufacturing overhead over-or under allocated (over-or under applied)? Please also state whether it is over or under allocated.
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Answer 1

a) Calculate following

Direct material used
Beginning raw material	26000
Raw material purchase	250000
Ending raw material	-33000
Direct material used		243000
Direct labor (4200*40)		168000
Manufacturing overhead (2700*80)		216000
Total manufacturing cost		627000
Beginning work in process		64000
Total cost of work in process		691000
Less: Ending work in process		-71000
Cost of goods manufactured		620000
Beginning finished goods		48000
Cost of goods available for sale		668000
Less; Ending finished goods		-45000
Cost of goods sold		623000

b) Applied overhead = 2700*80 = 216000

Actual overhead = 230000

Under applied overhead = 14000