Question

Exercise 3-7 Applying Overhead; Cost of Goods Manufactured [LO3-3, LO3-4]

The following cost data relate to the manufacturing activities of Chang Company during the just completed year:

Manufacturing overhead costs incurred:
Indirect materials	$	15,300
Indirect labor		133,000
Property taxes, factory		8,300
Utilities, factory		73,000
Depreciation, factory		152,100
Insurance, factory		10,300
Total actual manufacturing overhead costs incurred	$	392,000
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	403,000
Direct labor cost	$	63,000
Inventories:
Raw materials, beginning	$	20,300
Raw materials, ending	$	30,300
Work in process, beginning	$	40,300
Work in process, ending	$	70,300

The company uses a predetermined overhead rate of $20 per machine-hour to apply overhead cost to jobs. A total of 20,000 machine-hours were used during the year.

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.

Answer 1

Overhead cost 8000 Requirement: 1 Overapplied Explanation: Actual manufacturing overhead costs Manufacturing overhead applied: (20,000 Machine hours * $20 overhead rate) Overapplied overhead cost 392000 400000 8000 Requirement: 2 Chang Company Schedule of cost of Goods Manufactured Direct materials: Raw materials Inventory, beginning Add: Purchase of raw materials Total Raw materials available Less: Raw materials inventory, ending Raw materials used in production Less: Indirect materials Direct labor Manufacturing overhead cost applied to work in process Total manufacturing costs Add: Work in process inventory, beginning 20300 403000 423300 30300 393000 15300 377700 63000 400000 840700 40300 881000 70300 810700 Less: Work in process inventory, ending Cost of goods manufactured