Question

Ali Corporation is a manufacturer that uses job-order costing. The company closes out any over-applied or under-applied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year:

Beginning inventories:
Finished goods	$	33,000
Estimated total manufacturing overhead at the beginning of the year	$	635,500
Estimated direct labor-hours at the beginning of the year		41,000	direct labor-hours

Results of operations:

Actual direct labor-hours		42,000	direct labor-hours
Manufacturing overhead:
Indirect labor cost	$	177,000
Other manufacturing overhead costs incurred	$	444,000
Selling and administrative:
Selling and administrative salaries	$	280,000
Other selling and administrative expenses	$	310,000
Cost of goods manufactured	$	1,501,000
Sales revenue	$	2,704,000
Cost of goods sold (unadjusted)	$	1,416,000

Question:

Calculate the net operating income. (Round your intermediate calculations to 2 decimal places.).

Show your work in a word version format, please

Answer 1

Overhead rate = $635500 / 41000 = $15.50 per unit
Overhead applied = 42000 x 15.50 = $651000
Actual Overhead = $177000+444000 = $621000
Overhead is overapplied by $30000

Income Statement
Sales Revenue	$   2,704,000
Cost of Goods Sold (Adjusted)	$   1,386,000
Gross Profit	$   1,318,000
Selling and administrative:
Selling and administrative salaries	$       280,000
Other selling and administrative expenses	$       310,000
Net Operating Income	$      728,000

*Cost of Goods Sold (Adjusted) = $1416000 - 30000 = $1386000