Question

Exercise 3-7 (Algo) Applying Overhead; Cost of Goods Manufactured [LO3-3, LO3-4] The following cost data relate to the manufacturing activities of Chang Company during the just completed year: $ 16, 400 144,000 9, 400 84,000 210, 900 11, 400 476, 100 Manufacturing overhead costs incurred: Indirect materials Indirect labor Property taxes, factory Utilities, factory Depreciation, factory Insurance, factory Total actual manufacturing overhead costs incurred Other costs incurred: Purchases of raw materials (both direct and indirect) Direct labor cost Inventories: Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending $ 414,000 $ 74,000 $ 21, 400 $ 31, 400 $ 41,400 $ 71,400 The company uses a predetermined overhead rate of $23 per machine-hour to apply overhead cost to jobs. A total of 21,100 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

Requirement 1:

Overhead applied = Machine Hours * Predetermined overhead rate = 21100*23	485300
Indirect Materials	16400
Indirect labor	144000
Utilities, factory	84000
Depreciation, factory	210900
Insurance, factory	11400
Actual overhead costs	466700
As the overhead applied are more than the actual overhead costs, the overheads are overapplied.
Over applied OH	18600

2. Requirement 2:

Chang Company
Schedule of cost of goods manufactured
Direct materials :
Beginning raw materials	21400
Purchase of raw materials	397600
Total raw materials available	419000
Ending raw materials	31400
Raw materials used in production		387600
Direct labor cost		74000
Manufacturing overhead applied		485300
Total manufacturing costs		946900
Beginning work in process		41400
Total cost of work in process		988300
Ending work in process		71400
Cost of goods manufactured		916900