Question

Baab Corporation is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Raw materials Work in process Finished Goods Beginning Ending Balance Balance $ 14,150 $22,150 $ 27,150 $ 9,150 $ 62,150 $77,150 • The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,150 machine hours and incur $241.995 in manufacturing overhead cost. The following transactions were recorded for the year • Raw materials were purchased, $315,150. • Raw materials were requisitioned for use in production, $307,150 ($280,850 direct and $26,300 indirect). . The following employee costs were incurred: direct labor, $377,150; indirect labor, $96,150; and administrative salaries, $172,150, . Selling costs, $147150 • Factory utility costs, $10,150. • Depreciation for the year was $136,000 of which $120,300 is related to factory operations and $15.700 is related to selling, general, and administrative activities, • Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,030 machine-hours. • Sales for the year totaled $1,259,000, Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead underapplied or overapplied? By how much? c. Prepare an Income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold, Complete this question by entering your answers in the table below. Required A Required B Required Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold

Answer 1

Required a:

Direct materials:
Beginning material inventory	$14,150
Cost of material purchased	$315,150
Cost of material available	$329,300
(-) Ending material inventory	($22,150)
Total material used	$307,150
(-) Indirect material used	($26,300)
Direct material used		$280,850
Direct labor		$377,150
Manufacturing overhead applied (241,995 / 33,150) * 34,030		$248,419
Total manufacturing cost for the year		$906,419
(+) Beginning WIP		$27,150
Total cost of WIP during the year		$933,569
(-) Ending WIP		($9,150)
Cost of goods manufactured		$924,419

Required b:

Actual overhead (26,300 + 96,150 + 10,150 + 120,300)	$252,900
Applied overhead	($248,419)
Underapplied overhead	$4,481

Required c:

• Calculation of adjusted cost of goods sold:

Cost of goods manufactured	$924,419
(+) Beginning finished goods	$62,150
(-) Ending finished goods	($77,150)
Unadjusted cost of goods sold	$909,419
(+) Underapplied overheads	$4,481
Adjusted cost of goods sold	$913,900

• Income statement:

Sales		$1,259,000
(-) Cost of goods sold		($913,900)
Gross margin		$345,100
(-) Selling and administrative expenses:
Administrative salaries	$172,150
Selling cost	$147,150
Depreciation expenses	$15,700
Total selling and administrative expenses		($335,000)
Net operating income		$10,100