Question

Ravsten Company uses a job-order costing system The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 41,000 machine-hours and incur $184,500 in manufacturing overhead cost. The following transactions occurred during the year: Raw materials requisitioned for use in production, $195,000 (70% direct and 30% indirect b. The following costs were incurred for employee services: S 165,000 s 23,000 S 15,000 S 30,000 Direct labor Indirect labor ales commissions Administrative salaries c. Heat, power, and water costs incurred in the factory, $47,000. d. Insurance costs, $15,000 (80% relates to factory operations, and 20% relates to selling and administrative activities. e. Advertising costs incurred, $55,000 . Depreciation recorded for the year, $65,000 (75% relates to factory operations, and 25% relates to selling and administrative activities). g. The company used 45,000 machine-hours during the year h. Goods that cost $485,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse I. Sales for the year totaled $710,000. The total cost to manufacture these goods according to their job cost sheets was $480,000 Required: 1 Determine the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.).

Answer 1

Answer 1.
Actual Manufacturing Costs:
Indirect Material - $195,000 X 30%	58,500.00
Indirect Labor	23,000.00
Heat, Power and Water	47,000.00
Insurance - $15,000 X 80%	12,000.00
Depreciation - $65,000 X 75%	48,750.00
Total Actual Manufacturing Costs	189,250.00
Predetermined Overhead Rate = $184,500 (estimated overhead) / 41,000 Mach Hrs
Predetermined Overhead Rate = $4.50 per mach. Hr.
Applied Manuafcturing Overhead = 45,000 Mach hrs x $4.50
Applied Manuafcturing Overhead = $202,500
Applied Manufacturing Overhead	202,500.00
Actual Manufacturing Overhead	189,250.00
Overapplied Manufacturing Overhead	13,250.00
Answer 2.
Ravsten Company
Income Statement
For the Year Ended Dec 31
Sales		710,000.00
Adjusted Cost Of Goods Sold		466,750.00
Gross Margin		243,250.00
Selling & Administrative Expense
Sales Commissions	15,000.00
Administrative Salaries	30,000.00
Insurance Expense - $15,000 X 20%	3,000.00
Advertising Expense	55,000.00
Depreciation Expense - $65,000 X 25%	16,250.00	119,250.00
Net Operating Income		124,000.00
Cost of Goods Sold	480,000.00
Less: Overapplied Overhead	13,250.00
Adjusted Cost of Goods Sold	466,750.00