Question

Question 3 Coronado, Inc. manufactures ergonomically designed computer furniture. Coronado uses a job order costing system. On November 30, the Work in Process Inventory consisted of the following jobs: Units Job No. CC723 CH291 PS812 Item Computer caddy Chair Printer stand Accumulated Cost $980,000 434,000 296,000 $1,710,000 20,000 28,000 and On November 30, Coronado's Raw Materials Inventory account totaled $677,000, and its Finished Goods Inventory totaled $3,464,400. Coronado applies manufacturing overhead on the basis of machine hours. The company's manufacturing overhead budget for the year totaled $4,500,000, and the company planned to use 900,000 machine hours during the year Through the first eleven months of the year, the company used a total of 833,000 machine hours, total manufacturing overhead amounted to $4,274,500, and Cost of Goods Sold was $4,274,500. Coronado purchased $8,790,250 in raw materials in December and incurred the following costs for jobs in process that month: Job No. CC723 CH291 PS812 DS444 Materials Issued $165,000 $19,800 $213,000 $258,000 Machine Hours 15,000 4,400 23,500 17,000 Direct Labor Hours 14,100 3,600 19,300 14,500 Direct Labor Cost $126,400 $44,200 $213,500 $144,000 The following jobs were completed in December and transferred to the Finished Goods Inventory: Units Job No. CC723 CH291 DS444 Item Computer caddy Chair Desk 23,000 20,000 9,000 Assume that Coronado sold 14,000 computer caddies, 12,000 chairs, and 4,400 desks in December. (a) Coronado incurred $395,000 in manufacturing overhead in December. Given that expenditure, was manufacturing overhead under- or overapplied for the year? By how much? Overhead by s

Answer 1

a.

Estimated manufacturing overhead = $4,500,000

Estimated machine hours = 900,000

Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours

= 4,500,000/900,000

= $5 per machine hour

Applied manufacturing overhead = Actual machine hour x Predetermined overhead rate

= 59,900 x 5

= $299,500

Actual manufacturing overhead = $395,000

Under applied manufacturing overhead = Actual manufacturing overhead - Applied manufacturing overhead

= 395,000-299,500

= $95,500

Overhead

under applied

by

$95,500

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