Ans. A | Predetermined overhead rate = Total Estimated overhead cost / Estimated computer hours | |||
$1,755,000 / 90,000 | ||||
$19.50 | per computer - hour | |||
*Calculations: | ||||
*Variable manufacturing overhead = Variable manufacturing overhead per computer hour * Budgted computer hours | ||||
$5.30 * 90,000 | ||||
$477,000 | ||||
*Total estimated overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead | ||||
$477,000 + 1,278,000 | ||||
$1,755,000 | ||||
Ans. B | First, we need to calculate the overhead applied, then we will be able | |||
to calculate the over or under applied overhead cost. | ||||
Overhead applied = Actual computer hours * Predetermined overhead rate | ||||
85,000 * $19.50 | ||||
$1,657,500 | ||||
Now, we need to find out the value of actual manufacturing overhead cost. | ||||
Particulars | Amount | |||
Insurance, factory | $88,000 | |||
Depreciation of equipment | $170,000 | |||
Indirect materials | $12,000 | |||
Indirect labor | $327,000 | |||
Property taxes | $85,000 | |||
Maintenance | $630,000 | |||
Rent, building | $360,000 | |||
Actual manufacturing overhead (Total) | $1,672,000 | |||
Under applied overhead = Actual overhead - Applied overhead | ||||
$1,672,000 - $1,657,500 | ||||
$14,500 | ||||
If the applied overhead is less than the Actual overhead | ||||
it means that the overhead is under applied. | ||||
Ans. C | SANDAR COMPANY | |||
Schedule of Cost of goods manufactured | ||||
Particulars | Amount | Amount | ||
Beginning Work in process inventory | $960,000 | |||
Manufacturing Costs: | ||||
Direct materials: | ||||
Beginning raw materials inventory | $1,770,000 | |||
Add: Purchase of direct materials | $7,890,000 | |||
Raw materials available | $9,660,000 | |||
Less: Ending raw materials inventory | -$900,000 | |||
Direct materials used | $8,760,000 | |||
Direct labor | $1,722,000 | |||
Manufacturing overhead applied | $1,657,500 | |||
Total manufacturing costs | $12,139,500 | |||
Total cost of work in process | $13,099,500 | |||
Less: Ending Work in process inventory | -$870,000 | |||
Cost of goods manufactured | $12,229,500 | |||
Ans. D | The following journal entry is made to record Under applied overhead: | |||
Particulars | Debit | Credit | ||
Cost of goods sold | $14,500 | |||
Manufacturing overhead | $14,500 | |||
(under applied overhead closed to cost of goods sold) | ||||
SANDAR COMPANY | ||||
Schedule of Cost of Goods Sold | ||||
Particulars | Amount | |||
Cost of goods manufactured | $12,229,500 | |||
Add: Beginning finished goods inventory | $1,110,000 | |||
Cost of goods available for sale | $13,339,500 | |||
Less: Ending finished goods inventory | -$1,860,000 | |||
Unadjusted Cost of goods sold | $11,479,500 | |||
Add: Underapplied overhead | $14,500 | |||
Adjusted cost of goods sold | $11,494,000 | |||
Ans. E | SANDAR COMPANY | |||
Income Statement | ||||
For Year Ended December 31, 2019 | ||||
Particulars | Amount | Amount | ||
Sales | $18,100,000 | |||
Less: Cost of goods sold | -$11,494,000 | |||
Gross margin | $6,606,000 | |||
Less: Operating expenses: | ||||
Selling expenses | $1,070,000 | |||
Administrative expenses | $720,000 | |||
Total operating expenses | $1,790,000 | |||
Operating Income | $4,816,000 | |||
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