Question

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

Manufacturing overhead costs incurred:
Indirect materials	$	16,500
Indirect labor		145,000
Property taxes, factory		9,500
Utilities, factory		85,000
Depreciation, factory		231,700
Insurance, factory		11,500
Total actual manufacturing overhead costs incurred	$	499,200
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	415,000
Direct labor cost	$	75,000
Inventories:
Raw materials, beginning	$	21,500
Raw materials, ending	$	31,500
Work in process, beginning	$	41,500
Work in process, ending	$	71,500

The company uses a predetermined overhead rate of $24 per machine-hour to apply overhead cost to jobs. A total of 21,200 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. Compute the amount of underapplied or overapplied overhead cost for the year.

Actual overhead = 499200

Applied overhead = 24*21200 = 508800

Overapplied overhead = 508800-499200 = 9600

2)  Prepare a schedule of cost of goods manufactured for the year.

Direct material
Beginning raw material	21500
Raw material purchase	415000
Total material available for use	436500
Less: Ending raw material	-31500
Raw material used in production	405000
Less: Indirect material	-16500
Direct material used		388500
Direct labour		75000
Overhead applied		508800
Total manufacturing cost		972300
Beginning work in process		41500
Total cost of work in process		1013800
Less: Ending work in process		-71500
Cost of goods manufactured		942300