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	$	3,000
Utilities, factory		5,000
Indirect labor		10,000
Depreciation, factory		24,000
Insurance, factory		6,000
Total actual manufacturing overhead costs	$	48,000
Other costs incurred:
Purchases of raw materials	$	32,000
Direct labor cost	$	40,000
Inventories:
Raw materials, beginning	$	8,000
Raw materials, ending	$	7,000
Work in process, beginning	$	6,000
Work in process, ending	$	7,500

  

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 10,000 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

Solution

Overheads Overapplied

$ 2,000

.

Black Company
Cost of Goods manufactured
Direct Material
Raw material Inventory Beginning	$ 8,000
Raw material Purchased	$ 32,000
Raw material available for use	$ 40,000
Less: Raw material Inventory Ending	$ 7,000
Direct Material Used		$ 33,000
Direct labor		$ 40,000
Manufacturing Overheads applied		$ 50,000
Total manufacturing Cost		$ 123,000
Add: Beginning Work in Progress		$ 6,000
Total Cost of Work in Progress		$ 129,000
Less: Ending Work in progress		$ 7,500
Cost of Goods Manufactured		$ 121,500

Working

Overheads applied	$ 50,000
Actual overheads	$ 48,000
Overheads Overapplied	$ 2,000

.