Depreciation recorded on plant and equipment, $30,400. Three-fourths of the depr
ID: 2424371 • Letter: D
Question
Depreciation recorded on plant and equipment, $30,400. Three-fourths of the depreciation relates to factory equipment, and the remainder relates to selling and administrative equipment.
Insurance costs incurred, $5,400 (80% relates to factory operations, and 20% relates to selling and administrative activities).
Manufacturing overhead was applied to production. The company applies overhead on the basis of 130% of direct labor cost.
Goods that cost $142,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
Durham Company uses a job-order costing system. The following transactions took place last year:Explanation / Answer
Answer 1 Manufacturing Overhead applied = 130% of Direct labour cost Hence Manufacturing Ovehead applied = 130% * $52000 = $67600 Actual Manufacturing overhead incurred as under, Particulars In $ Indirect Raw Material (20% of $52000) 10400 Indirect labour cost 19200 Factory Utility cost 15800 Depreciation (3/4 th of $30400) 22800 Insurance cost (80% of 5400) 4320 Total Manufacturing overhead 72520 Hence Manufacturing overheads were underapplied to the extent of = $72520 - $67600 = $4920 Answer 2 Income Statement for the year Particulars In $ Sales 224000 (+) Finished Goods Inventory 142000 Tota Revenue 366000 Expenses Underapplied Manufacturing Overhead 4920 Depreciation of selling equipment 7600 Sales Commission 11200 Administrative salary 37000 Insurance 1080 Mise selling & administrative exp. 19200 Total Expenses 81000 Net Profit 285000
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