costing system and applies manufacturing overhead cost to products on the basis

Question

costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year Machi Fixed manufacturing overhead cost Variable manufacturing overhead per computer-hour 3.30 81,000 S1.277 000 rs During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's.cost records revealed the following actual cost and operating data for the year Machi Manufacturing overhead cost Inventories at year-end 60,000 s 1,247,000 Raw materials Work in process (includes overhead applied of 45,768) $ 400,000 $ 180,000 $ 1,020,000 s 2,720,000 goods (includes overhead applied of 228,840) Cost of goods sold (includes overhead applied of 869 592) Required 1. Compute the company's predetermined overhead rate for the year (Round your answer to 2 decimial Predetermined overhead rate $ 19 07 per hour

Explanation / Answer

Answer will be $ 24,762 greater

First caluclate the percentage of ovehead in Cost of goods sold as given in question

= $869,592/1,144,200 = 76%

When the underapplied is closed to manufacturing overhead

then cost of goods sold will be   (2,720,000+102,800)                                       $2,822,800

When allocated ( 2,720,000 + 78,128 ( 102,800@76% )   *                                   2,798,128

difference                                                                                                                 $24,672

* Rest will be allocated to WIP and finished goods in the percentage given                                    

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