O You received partial credit in the previous attempt Luzadis Company makes furn

Question

O You received partial credit in the previous attempt Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $651,000 of total manufacturing overhead for an estimated activity level of 93,000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a bulidup of furniture company's warehouse. The company's cost records revealed the following actual cost and operating d in the Manufacturing overhead cost Inventories at year-end: S618,ede 11.009 S 347,709 Finished goods (includes Cost of goods sold (includes overhead applied of $378,140) ferences Required: 1. Compute the underapplied or overapplied overhead 2. Assume that the company closes any underapplied or overapplied overheed to Cost of Goods Sold. Prepare the appropriate journal entryne that allocates any underapplied or overapplied ovenead proportionaly to work n Process, Finished Goods. and Cost of Goods Sold. Prepare the appropriate journal entry 4. How much higher or lower will net operating income be if the underapplied or overapplied Finished Goods, and Cost of Goods Sold rather than beingc to Cost of Goods Sold? Complete this question by entering your answers in the tabs overhead cost Prev6 of 6

Explanation / Answer

1 Overhead applied = 651000/93000*74000= $518000 Underapplied overhead cost = 618000-518000 = $100000 2 Cost of goods sold 100000        Manufacturing overhead 100000 3 Work in Process 8000 =100000/518000*41440 Finished goods 19000 =100000/518000*98420 Cost of goods sold 73000 =100000/518000*378140        Manufacturing overhead 100000 4 Net operating income will be $27000 greater if the underapplied overhead is allocated rather closed directly to cost of goods sold Net operating income difference = 100000-73000 = $27000

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