Question

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

Manufacturing overhead costs:
Property taxes, factory	$	4,400
Utilities, factory		7,100
Indirect labour		12,800
Depreciation, factory		27,500
Insurance, factory		8,800
Total actual manufacturing overhead costs	$	60,600
Other costs incurred:
Purchases of raw materials.	$	39,000
Direct labour cost	$	49,800
Inventories:
Raw materials, beginning	$	10,800
Raw materials, ending	$	8,400
Work in process, beginning	$	8,100
Work in process, ending	$	10,300

The company uses a predetermined overhead rate to apply overhead cost to production. The rate for the year was $6 per machine-hour; a total of 11,000 machine-hours were 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.

Answer 1

1.

Under or overapplied overhead cost = Actual overhead - Applied overhead

Under or overapplied overhead cost = $60,600 - $66,000 (11,000*$6)

Overapplied overhead = $5,400

2.

Schedule of Cost of Goods Manufactured
Raw material, beginning	$10,800
Add: Purchases of raw material	39,000
Less: Raw material, ending	8,400
Direct material used		$41,400
Direct labour		49,800
Overhead applied		66,000
Total manufacturing costs		157,200
Add: Work in process, beginning		8,100
Less: Work in process, ending		10,300
Cost of goods manufactured		$155,000