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Applying Overhead; Cost of Goods Manufactured [L02, L06, L07] The following cost

ID: 2350858 • Letter: A

Question

Applying Overhead; Cost of Goods Manufactured [L02, L06, L07] The following cost data relate to the manufactoring activities of Black Company during the just completed year: 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 10,000 machinhourswas recorded for the year. All raw materials ultimately become direct materials-none are classified as indirect materials. Required: Compute the amount of underapplied or overapplied overhead cost for the year. Prepare a schedule of cost of goods manufactured for the year.

Explanation / Answer

1.
Overhead rate = 10000*5 = $50,000
Actual result:
32000+40000+8000-7000+6000-7500
= $71,500
Under-applied (when actual expenditure is more than predetermined) Overhead rate therefore = 71,500-50,000 = $21,500 Answer

2.
Black Company Manufacturing Account for the year
                                                            $                $
Direct Materials Inventory beginning      8000
Purchases of raw materials                  32000

                                                         40,000

Less Direct Materials Inventory closing (7000)       33000

Direct Labour                                                      40000

Prime Cost                                                    73000

Indirect Costs:

Property taxes, factory                       3000

Utilities, factory                                 5000

Indirect Labor                                    10000

Depreciation                                      24000

Insurance, factory                              6000

Total actual manufacturing overheads                  48000

(73000 + 48000)                                                 121,000

Work in progress beginning                6000

Work in progress closing                    (7500)        (1,500)

Total cost of manufactured goods                        119,500 (Answer)

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