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		4,900
Indirect labor		9,900
Depreciation, factory		24,000
Insurance, factory		6,000
Total actual manufacturing overhead costs	$	47,800
Other costs incurred:
Purchases of raw materials	$	31,900
Direct labor cost	$	41,000
Inventories:
Raw materials, beginning	$	8,300
Raw materials, ending	$	6,300
Work in process, beginning	$	5,300
Work in process, ending	$	7,900

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 11,400 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.)

Black Company
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials available for use
Raw materials used in production
Total manufacturing cost
Cost of goods manufactured

Answer 1

Answer 1.

Manufacturing Overhead applied = Predetermined Overhead Rate * Number of machine-hours
Manufacturing Overhead applied = $5 * 11,400
Manufacturing Overhead applied = $57,000

Actual Manufacturing Overhead = $47,800

Overapplied Overhead Cost = Manufacturing Overhead applied - Actual Manufacturing Overhead
Overapplied Overhead Cost = $57,000 - $47,800
Overapplied Overhead Cost = $9,200

Answer 2.