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 42,000 machine-hours and incur $191,100 in manufacturing overhead cost. The following transactions occurred during the year:
a. Raw materials requisitioned for use in production, $240,000 (75% direct and 25% indirect).
b. The following costs were incurred for employee services:
Direct labor | $ | 166,000 | |
Indirect labor | $ | 24,000 | |
Sales commissions | $ | 16,000 | |
Administrative salaries | $ | 31,000 | |
c. Heat, power, and water costs incurred in the factory, $48,000.
d. Insurance costs, $16,000 (85% relates to factory operations, and 15% relates to selling and administrative activities).
e. Advertising costs incurred, $56,000.
f. Depreciation recorded for the year, $66,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
g. The company used 46,000 machine-hours during the year.
h. Goods that cost $486,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Sales for the year totaled $712,000. The total cost to manufacture these goods according to their job cost sheets was $481,000.
Required:
1. Determine the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.).
Overhead applied__________
2. Prepare an income statement for the year. (Hint: No calculations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead.) (Round predetermined overhead rate to 2 decimal places.)
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Ravsten Company uses a job-order costing system. The company applies overhead cost to jobs on...
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