Savallas Company is highly automated and uses computers to control manufacturing
ID: 2373931 • Letter: S
Question
Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:
During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company%u2019s warehouse. The company%u2019s cost records revealed the following actual cost and operating data for the year:
Compute the company%u2019s predetermined overhead rate for the year. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Compute the underapplied or overapplied overhead for the year. (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Input the amount as a positive value. Omit the "$" sign in your response.)
Assume the company closes any underapplied or overapplied overhead directly to cost of goods sold. Prepare the appropriate entry. (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Assume that the company allocates any underapplied or overapplied overhead to work in process, finished goods, and cost of goods sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year. These amounts are $37,340 for work in process, $224,040 for finished goods, and $672,120 for cost of goods sold. Prepare the journal entry to show the allocation. (Round your intermediate calculations and percentage values to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated rather than closed directly to cost of goods sold? (Round your intermediate calculations and percentage values to 2 decimal places and final answers to the nearest dollar amount. Input the amount as a positive value. Omit the "$" sign in your response.)
Explanation / Answer
1.
Compute the company%u2019s predetermined overhead rate for the year. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Predetermined overhead rate
$18.67 per hour
2.
Compute the underapplied or overapplied overhead for the year. (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Input the amount as a positive value. Omit the "$" sign in your response.)
Under Applied Overhead Cost
$74500
3.
Assume the company closes any underapplied or overapplied overhead directly to cost of goods sold. Prepare the appropriate entry. (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
General Journal
Debit
Credit
Cost Of Good Sold
$74500
Manufacturing overhead
$74500
4.
Assume that the company allocates any underapplied or overapplied overhead to work in process, finished goods, and cost of goods sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year. These amounts are $37,340 for work in process, $224,040 for finished goods, and $672,120 for cost of goods sold. Prepare the journal entry to show the allocation. (Round your intermediate calculations and percentage values to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
General Journal
Debit
Credit
Work in process $2980
Finished Good $17880
Cost of Good Sold $53640
Manufacturing overhead $74500
5.
How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated rather than closed directly to cost of goods sold? (Round your intermediate calculations and percentage values to 2 decimal places and final answers to the nearest dollar amount. Input the amount as a positive value. Omit the "$" sign in your response.)
Net operating income will be $20,860 greater if the underapplied overhead is allocated among work in process, finished goods, and cost of goods sold rather than closed directly to cost of goods sold.
1.
Compute the company%u2019s predetermined overhead rate for the year. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
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