Question

Ali Corporation is a manufacturer that uses job-order costing. The company closes out any over-applied or...

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

Homework Answers

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

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