The following cost data relate to the manufacturing activities of Newberry Compa

Question

The following cost data relate to the manufacturing activities of Newberry Company during the just completed year: The company uses a predetermined overhead rate to apply manufacturing overhead cost to production. The predetermined overhead rate for the year was $15 per machine-hour. A total of 23,000 machine-hours were recorded for the year. Required: Compute the amount of underapplied or overapplied manufacturing overhead cost for the year. Prepare a Schedule of Cost of Goods Manufactured for the year.

Explanation / Answer

a. Under applied Overhead costs:

Actual Overhead cost = 3,53,000

Estimated = 23,000*15 = 3,45,000

Therefore an amount of $8,000 (3,53,000 - 3,45,000) is under applied.

b. Schedule for Cost of goods manufatured:

Direct Materials Used: Beginning Raw Materials Inventory            10,000 Add: Cost of raw materials purchased          250,000 Total Raw materials available          260,000 Less: Ending Raw materials inventory          (15,000) Total Raw materials used          245,000 Direct Labor          135,000 Manufacturing Over Head          353,000 Add: Beginning WIP            20,000 Less: Ending WIP          (35,000) Cost of goods Manufactured          718,000

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