Question

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

Manufacturing overhead costs incurred:
Property taxes, factory	$	2,900
Utilities, factory		5,000
Indirect labor		10,000
Depreciation, factory		23,900
Insurance, factory		5,900
Total actual manufacturing overhead costs	$	47,700
Other costs incurred:
Purchases of raw materials	$	32,400
Direct labor cost	$	39,400
Inventories:
Raw materials, beginning	$	8,700
Raw materials, ending	$	6,500
Work in process, beginning	$	5,700
Work in process, ending	$	6,900

The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $5 per machine-hour; a total of 12,000 machine-hours was recorded for the year. All raw materials ultimately become direct materials—none are classified as indirect materials.

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 using the indirect method. (Enter all deductions as a negative.)

     

Answer 1

1.) Applied overhead = 12000*5 = 60000

Actual overhead = 47700

Over applied overhead = 60000-47700 = 12300

2) Schedule of Cost of goods manufactured

Direct material
Beginning raw material	8700
Purchase raw material	32400
Raw material available for use	41100
Less: Ending raw material	-6500
Direct material		34600
Direct labor		39400
Overhead applied		60000
Total manufacturing cost		134000
Beginning work in process		5700
Total Cost of work in process		139700
Less: Ending work in process		-6900
Cost of goods manufactured		132800