Question

Problema IV (20 Puntos)

Guaraguao Manufacturing is a small manufacturer that uses machine-hours as its activity base for assigned overhead costs to jobs. The company estimated the following amounts for 2018 for the company and for Job 62:

                                                                   Company                 Job 325

                                                                  Estimasted

                                                                  Annual Cost             

Direct materials                                    $70,000                   $5,500

Direct labor                                           $30,000                   $2,300

Manufacturing overhead costs             $67,500

Machine hours                                        90,000                     2,000

During 2018, the actual machine-hours totaled 94,000, and actual manufacturing overhead costs were $72,000.

Instructions:

1. Compute the predetermined overhead rate.

2. Compute the total manufacturing costs for Job 325.

3. How much overhead is over or underapplied for the year for the company? State amount and whether it is over- or underapplied.

4. If Carpet Manufacturing sells Job 325 for $15,000, compute the gross profit.

Answer 1

a)Predetermined Overhead =esrtimated manufacturing overhead cost/ estimated no of machine hours

=67500/90000=$0.75 per machine hourse

b)total manufacturing costs for job 325=direct material+direct labour+manufacturing overhead costs

=5500+2300+(0.75*2000)=9300

c) Applied overhead=actual hours*predetermined overhead=94000*0.75=70500

actual manufacturing overhead=72000

if actual overhead is >applied overhead it is underapplied

if actual overhead is <applied overhead it is overapplied

underapplied =1500

d) gross profit=revenue-cost of sale

revenue=15000

cost of sale=direct material+direct cost +other expense=5500+2300+((2000/90000)*94000=9888.88

gross profit=15000-9888.88=5111.12