Question

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

Manufacturing overhead costs incurred:
Indirect materials	$	15,100
Indirect labor		131,000
Property taxes, factory		8,100
Utilities, factory		71,000
Depreciation, factory		269,100
Insurance, factory		10,100
Total actual manufacturing overhead costs incurred	$	504,400
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	401,000
Direct labor cost	$	61,000
Inventories:
Raw materials, beginning	$	20,100
Raw materials, ending	$	30,100
Work in process, beginning	$	40,100
Work in process, ending	$	70,100

The company uses a predetermined overhead rate of $26 per machine-hour to apply overhead cost to jobs. A total of 19,800 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 10400 Requirement: 1 Overapplied Explanation: Actual manufacturing overhead costs Manufacturing overhead applied: (19,800 Machine hours * $26 overhead rate) Overapplied overhead cost 504400 514800 10400 20100 401000 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 421100 30100 391000 15100 375900 61000 514800 951700 40100 991800 70100 Less: Work in process inventory, ending Cost of goods manufactured 921700

Note: Overapplied overhead cost = 514 800 - 504 400 = $10 400