Question

Baab Corporation is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:

	Beginning Balance		Ending Balance
Raw materials	$	14,950​	$	22,950​
Work in process	$	27,950​	$	9950​
Finished Goods	$	62,950​	$	77,950​

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,950 machine-hours and incur $302,155 in manufacturing overhead cost. The following transactions were recorded for the year:

Raw materials were purchased, $315,950.

Raw materials were requisitioned for use in production, $307,950 ($280,050 direct and $27,900 indirect).

The following employee costs were incurred: direct labor, $377,950; indirect labor, $96,950; and administrative salaries, $172,950.

Selling costs, $147,950.

Factory utility costs, $10,950.

Depreciation for the year was $184,000 of which $173,000 is related to factory operations and $11,000 is related to selling, general, and administrative activities.

Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,190 machine-hours.

Sales for the year totaled $1,325,000.

Required:

Do not enter any commas (except for the pre-determined OH rate) and round to the nearest dollar

Based on the data presented above, complete the following Table

Pre-Determined OH Rate (round to 2 decimal places)	$Blank 1
Direct Materials used in Production	$Blank 2
Direct Labor	$377,950
Total Manufacturing Costs	$Blank 3
Cost of Goods Manufactured	$Blank 4
Adjusted Cost of Goods Sold	$Blank 5
Total Selling and Admin Exp	$331,900
Operating Income	$Blank 6

Answer 1

Answer: -

1. Pre Determined Overhead Rate= Total Budgeted Manufacturing OH Cost / Estimated Machined Hours

$302155 / 33950 hrs = $ 8.9 per hour

2. Prime Cost= Direct Material consumed + Direct Labour

$280050 + $377950 = $658000

3. Manufacturing Overhead= Actual Machine Hours * OH Rate

34190 hrs * 8.9 = $304291

4. Total Manufacturing Cost= Prime Cost + Manufacturing Overhead

$658000 + $304291 = $962291

5. Cost of Goods Manufactured = Total Manufacturing Cost + Opening WIP - Closing WIP

$962291 + $27950 - $9950 = $980291

6. Cost of goods sold = Cost of goods manufactured + Selling Overhead

$980291 + $172950 + $147950 + $11000 = $1312191

7. Adjusted Cost of Goods Sold = Cost of Goods Sold + Opening F.G. - Closing F.G.

$1312191 + 62950 - 77950 = $1297191

8. Operating Income = Sales - Adjusted Cost of goods Sold

$1325000 - $1297191 = $27809