Question

3 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 sints eBook $ 16,300 143,000 9,300 83,800 149, 100 11,300 $ 412,000 Print References 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 $ 413,000 $ 23,000 $ 21,300 $ 31,300 $ 41,300 $ 71,300 The company uses a predetermined overhead rate of $20 per machine-hour to apply overhead cost to jobs. A total of 21000 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. M Graw Hill < Prev 3 of 3 BE Next

Answer 1

1.

Over/under applied overhead = Applied overhead - Actual overhead

Applied Overhead costs = 21000 machine hours * $20 = $420000

Manufacturing Overhead costs Incurred = $412000

Applied cost is higher than incurred cost.

Hence Over applied Manufacturing Overhead Cost = $420000 - $412000 = $8000

2.

SCHEDULE OF COST OF GOODS MANUFACTURED
Direct materials:
Beginning raw materials	$21300
Purchases of raw materials	$413000
Total raw materials available	$434300
Less:Ending raw materials	$31300
Raw materials used in production	$403000
Less: Indirect Materials	$16300
Direct material used		$386700
Direct labor		$73000
Applied manufacturing overhead		$420000
Total manufacturing costs		$879700
Beginning work in process		$41300
		$921000
Ending work in process		$71300
Cost of goods manufactured		$849700

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