Question

110% Beginning balance, Finished Goods Inventory 17,000 Purchases of raw materials 54,000 Factory electricity 10,000 Direct labor payroll 32,000 Depreciation on factory equipment 35 000 Insurance on factory building 8,000 Indirect materials used in production 7.000 Total raw materials used in production 65.000 Indirect labor payroll 24 000 Cost of goods manufactured 200,000 Cost of goods sold 210.000 Estimated manufacturing overhead is $450,000 and overhead is allocated based on machine hours. Estimated machine hours are 750,000 hours. Actual machine hours incurred was 145,000 hours. Actual overhead incurred was tracked to determine the adjustment to cost of goods sold for any underlover applied manufacturing overhead. Instructions: ture Questions: 4. Was overhead underapplied or overapplied? By how much? 5. Assuming unadjusted cost of goods sold is included in the given information, calculate the cost of goods sold using the direct method. €. In one concise sentence name the main benefit of segmented income statements

Answer 1

4. Overhead was Explanation ovenopplied by an arnouot of $ 3000, Pre determined iabb lied ovewhead lates foltory Electricing Estirrated manufacturing oveyhead Estimated machine hours $450 000 $ 0.60 per machine hour 750 000 hours Applied overhead late $0.60 per machine hour. Acual machine hours in curred = 145000 hours, Applied overhead - Applied overhead Patex Actual machine hours = 145000 x $0.60= $87000 Applied ovewhead: $87000 Calculation of a chal Manufacturing overhead : Indirect Matenials Indirect labor $ 24000 Depreciation on forctory Equipment $3.5000 $ 8000 $ 10000 $84000 Actual overhead $ 7000 Over Applied overhead: Applied Oveehead - Actual Overhead - $87000 - $84000 ovex-Applied overhead $ 3000 Ovee applied ovey head is the situation in which applied overhead is grates than actual ovey head incurred.

8. Explanation : less: oven applied ovewhead ($3000] diffeuences between actual and applied manufacturing lost of Croods sold using Direct method is $ 207000 Unadjusted cost of Goods sold , $ 210000 $ 207000 Cost Of Goods sold appears on the income statement is adjusted for ovevhead: Qua Undey applied Ovey head increases the expense and added to Cost of Goods sold for adjustment and ovey applied overhead decreases the expense and hence deducted from cost of Goode Adjusted last of Goods sold sold 6). The main benefit of segmented Income statements is that it helbs in deteymining how profitable a segment is and howo nou ch Profit Contributing to company o 17 deteumines each segment Contribution to Company's overall profitabi lí ty,