Question

The following cost data relate to the manufacturing activities of Chang Company during the just completed year:

Manufacturing overhead costs incurred:
Indirect materials	$	15,200
Indirect labor		132,000
Property taxes, factory		8,200
Utilities, factory		72,000
Depreciation, factory		152,400
Insurance, factory		10,200
Total actual manufacturing overhead costs incurred	$	390,000
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	402,000
Direct labor cost	$	62,000
Inventories:
Raw materials, beginning	$	20,200
Raw materials, ending	$	30,200
Work in process, beginning	$	40,200
Work in process, ending	$	70,200

The company uses a predetermined overhead rate of $20 per machine-hour to apply overhead cost to jobs. A total of 19,900 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

1.

Underapplied or overapplied overhead = Applied manufacturing overhead - Actual manufacturing overhead

Underapplied or overapplied overhead = $398,000 (19,900*$20) - 390,000

Overapplied manufacturing overhead = $8,000

2.

Schedule of Cost of Goods Manufactured
Beginning raw materials	$20,200
Raw material purchases	402,000
Total raw material available	422,200
Ending raw materials	(30,200)
Raw material consumed	392,000
Indirect material	(15,200)
Direct material used		$376,800
Direct labor cost		62,000
Manufacturing overhead applied (19,900*$20)		398,000
Total manufacturing cost		836,800
Beginning work in process		40,200
Ending work in process		(70,200)
Cost of goods manufactured		$806,800