Question

The following cost data relate to the manufacturing activities of Chang Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials $ 16,000 Indirect labor 140,000 Property taxes, factory 9,000 Utilities, factory 80,000 Depreciation, factory 251,500 Insurance, factory 11,000 Total actual manufacturing overhead costs incurred $ 507,500 Other costs incurred: Purchases of raw materials (both direct and indirect) $ 410,000 Direct labor cost $ 70,000 Inventories: Raw materials, beginning $ 21,000 Raw materials, ending $ 31,000 Work in process, beginning $ 41,000 Work in process, ending $ 71,000 The company uses a predetermined overhead rate of $25 per machine-hour to apply overhead cost to jobs. A total of 20,700 machine-hours were used during the year. 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
Actual Manufacturing overhead costs	507500
Manufacturing overhead applied	517500	=20700*25
Overapplied overhead cost	10000
2
Direct materials:
Raw materials inventory, beginning	21000
Add: Purchases of raw materials	410000
Raw materials available for use	431000
Less: Raw materials inventory, ending	31000
Raw materials used in production	400000
Less: Indirect materials	16000	384000
Direct labor		70000
Manufacturing overhead cost applied to work in process		517500
Total manufacturing costs		971500
Add: Work in process inventory, beginning		41000
		1012500
Less: Work in process inventory, ending		71000
Cost of goods manufactured		941500