Sallie Company applies factory overhead on the basis of a rate per direct labor-hour. The company...

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Sallie Company applies factory overhead on the basis of a rate per direct labor-hour. The company provides you with the follo

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Answer 1

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1.

Cost of Goods Manufactured Statement for the month ending May
Particulars	Amount ($)
Material Cost	48,000
Labour cost	2,94,000
Applied Factory Overhead (45000 X 1.51)	68,000
Beginning Work in process	85,000
Beginning finished goods	60,000
	5,55,000
Less: Ending Work in process	78,000
Less: Ending Finished goods inventory	81,000
Cost of Goods manufactured	3,96,000

Income Statement for the month ending May
Particulars	Amount ($)
Net Sales	6,00,000
Less: Cost of Goods manufactured	3,96,000
Net profit	2,04,000

2.

Calculation of Factory Overhead Application Rate
Since Jordan Company applied its factory overhead at direct labour hourly rate, the calculation is as below:
Gross Margin = Sales - Material Cost- Labour Cost - Applied Factory Overhead
Factory Overhead = Sales - Material Cost- Labour Cost - Gross margin
Factory Overhead = 600000-48000-294000-190000
Applied Factory Overhead	68,000
Actual Direct labour Hour	45,000
Applied Factory Overhead on Direct Labour Hour Rate = 68000/45000
Applied Factory Overhead on Direct Labour Hour Rate = $ 1.51 per LHR

3.

Calculation of Over/Under Factory Overhead Applied
Actual Factory Overhead Cost	58,100
Applied Factory O/H (45000 X 1.51)	68,000
Factory Overhead is over-applied by	9,900

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Answer 2

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