Question

18) Precision Corporation used a predetermined overhead rate last year of $3 per direct labor-hour, based on an estimate of 24,000 direct labor-hours to be worked during the year. Actual costs and activity during the year were: Actual manufacturing overhead cost incurred 34,000 Actual direct labor-hours worked 127,000 The overapplied or underapplied manufacturing overhead for the year was: A) $3,000 underapplied B) $3,000 overapplied C) $12,000 underapplied D) $12,000 overapplied 19) Boursaw Corporation has provided the following data concerning last month's operations. Purchases of raw materials $33.000 Indirect materials included in manufacturing overheads 4,000 Direct labor cost 58,000 Manufacturing overhead applied to Work in Process $78,000 Underapplied overhead 5.000 Beginning Ending Raw materials inventory 10,000$15.000 Work in process inventory 56,000$ 72,000 Finished goods inventory 41,000 $9,000 Any underapplied or overapplied manufacturing overhead is closed out to cost of goods sold. How much is the adjusted cost of goods sold on the Schedule of Cost of Goods Sold? A) $136,000 B) $185,000 C) $144,000 D) $141,000

Answer 1

Answer (18): Option (C) is the correct answer. Calculation: Predetermined Overhead rate $3 Estimated Direct Labor Hour 24,000 Total Predetermined $3* 24,000 $72,000 Manufacturing Overhead (A) Actual Manufacturing Overhead $84,000 Incurred (B) Overhead Underapplied(B- A) $12,000 Answer(19) Option (D) $141,000 is the correct answer. Schedule of cost of goods manufactured Direct material Beginning balance of raw material Inventory $10,000 Add: Purchase of raw material ($33,000 - $4,000) 29,000 Raw material available for use $39,000 Less: Closing balance of raw material Inventory (15,000) Direct material used 24,000 Direct labor 58,000 Factory overheads 78,000 Total manufacturing cost 160,000 Add: Beginning work in process 56,000 Total cost of work in process 216,000 Less: Closing work in process (72,000) Cost of goods manufactured $144,000 Add: Beginning balance of finished goods 41,000 $185,000 Less: Ending balance of finished goods (49,000) Unadjusted Cost of good sold $136,000 Add: Underapplied Overhead 5,000 Adjusted Cost of good sold $141,000