Bakerston Company is a manufacturing firm that uses job-order costing. The compa

Question

Bakerston Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 17,500 machine-hours and incur $262,500 in manufacturing overhead cost. The following transactions were recorded for the year:

Raw materials were requisitioned for use in production, $410,900 ($382,000 direct and $28,900 indirect).

The following employee costs were incurred: direct labor, $332,000; indirect labor, $71,000; and administrative salaries, $154,000.

Depreciation for the year was $124,000 of which $110,000 is related to factory operations and $14,000 is related to selling, general, and administrative activities.

Manufacturing overhead was applied to jobs. The actual level of activity for the year was 14,200 machine-hours.

Prepare a schedule of cost of goods manufactured in good form. (Do not round predetermined overhead rate. Input all amounts as positive values.)

Was the overhead underapplied or overapplied? By how much? (Do not round predetermined overhead rate. Input the amount as a positive value.)

Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold. (Input all amounts as positive values.)

Bakerston Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:

Explanation / Answer

Answer:

Schedule of cost of goods manufactured: Estimated total manufacturing overhead (a) 262500 Estimated total machine hours (b) 17500 Predetermined overhead rate (a)/(b) 15 Actual machine hours (a) 14200 Predetermined overhead rate (b) 15 Overhead applies (a)*(b) 213000 Direct material: Raw material, beg 11700 Add: Purchases of raw materials 415000 Total raw material available 426700 Less: Raw material, ending 15800 Raw material used in production 410900 Less: Indirect material 28900 Direct material 382000 Direct labor 332000 Manufacturing overhead applied 213000 Total manufacturing costs 927000 Add: Beg WIP 32700 Less: Closing WIP 14600 Cost of goods manufactured 945100 b. Overhead Underapplied or overapplied: Actual manufacturing costs incurred: Indirect materials 28900 Indirect labor 71000 Factory utilities 27000 Factory dep 110000 Manufacturing overhead cost incurred 236900 Manufacturing overhead applied 213000 Overhead is underapplied 23900 c. Income Statement Beg Finished goods inventory 102000 Cost of goods manufactured 945100 Goods available for sale 1047100 Ending finished goods inventory 121000 Unadjusted COGS 926100 Less: Underapplied or overapplied overhead 23900 Adjusted COGS 902200 Sales 1283000 COGS adjusted 902200 Gross margin 380800 Less: Selling and administrative salaries Administrative salaries 154000 Selling costs 115000 Dep 14000 Net operating income 97800

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