Question

# The accounting records of Omar Company contained the following information for last year: Beginning Ending Direct...

The accounting records of Omar Company contained the following information for last year:

 Beginning Ending Direct materials inventory........................ \$9,000 \$7,000 Work in process inventory....................... \$17,000 \$31,000 Finished goods inventory........................ \$10,000 \$15,000 Manufacturing costs incurred Direct materials used............................... \$72,000 Overhead applied..................................... \$24,000 Direct labor cost (10,000 hours).............. \$80,000 Depreciation............................................. \$10,000 Rent......................................................... \$12,000 Taxes........................................................ \$8,000 Cost of goods sold................................... \$157,000* * Selling and administrative costs incurred Advertising.............................................. \$35,000 Rent......................................................... \$20,000 Clerical..................................................... \$25,000

3. If Omar Company applies overhead to jobs on the basis of direct labor hours and Job 3 took 120 hours, how much overhead should be applied to that job?

 \$528
 \$960
 \$360
 \$288

4. The cost of goods manufactured for the year (prior to any under/over-applied adjustments) was:

 \$135,000
 \$190,000
 \$162,000
 \$168,000

Solution 3:

Direct labor hours = 10000

Overhead absorption rate = \$24,000/10000 = \$2.4/hour

Required direct labor hours for job 3 = 120

Applied overhead to Job 3 = 120*2.40 = \$288

Solution 4:

Let X is number of unit produced

Then no of unit sold = Opening stock + Unit produced - Finished stock

= 10000 + X - 15000 = X-5000

Cost of (X-5000) units =\$157,000.......Equation 1

Unit processed = Closing WIP + Unit produced - Opening WIP = 31000 + X -17000 = X + 14000

Cost of unit processed = 72000 + 24000 + 80000 = \$176,000

Cost of (X+14000) units = \$176,000....Equaiton 2

On solving equation 1 & 2:

Cost of 19000 units = \$19,000

per unit cost produced = \$1 per unit

Therefore

Cost of (X-5000) units = 157000

(X-5000)*1 = 157000

X = 162000 units

Therefore number of unit manufactured are 162000 units and cost of goods manufactured = 162000*1 = \$162,000

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