Kody Corporation uses a job-order costing system with a plantwide overhead rate

Question

Kody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hour:s At the beginning of the year, the company made the following estimates Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per machine-hour 153,000 $655,000 4.50 $ Required: 1. Compute the predetermined overhead rate. (Round your answer to 2 decimal places.) Predetermined overhead rate per MH 2. During the year Job 500 was started and completed. The following information was available with respect to this job Direct materials requisitioned Direct labor cost Machine-hours used $ 360 $290 31 Compute the total manufacturing cost assigned to Job 500. (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.) lotal manufacturing cost 3-a. During the year the company worked a total of 145,600 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,284,868. What is the amount of underapplied or overapplied overhead for the year? (Input the amount as a positive value. Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.) Manufacturing overhead cost (Click to select) by 3-b. If this amount were closed out entirely to Cost of Goods Sold, would the journal entry increase or decrease net operating income? Increase Decrease

Explanation / Answer

1a) Predetermine overhead rate = (655000/153000)+4.50 = 8.78 per Mh

2a) Calculate total manufacturing cost :

3a) Applied overhead = 8.78*145600 = 1278368

Actual overhead = 1284868

Under applied overhead = 1284868-1278368 = 6500

Manufacturing overhead under applied by $6500

3b) If this amount were closed out entirely to cost of goods sold journal entry decrease net operating income

So answer is b) Decrease

Direct material 360 Direct labour 290 Manufacturing overhead (31*8.78) 272 Total manufacturing cost 922

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