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:

Beginning Balance Ending Balance

Raw materials $ 11,400 $ 15,600

Work in process $ 32,600 $ 14,300

Finished goods $ 108,000 $ 121,000

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 17,700 machine-hours and incur $265,500 in manufacturing overhead cost. The following transactions were recorded for the year: '

• Raw materials were purchased, $411,000.

• Raw materials were requisitioned for use in production, $406,800 ($386,000 direct and $20,800 indirect).

• The following employee costs were incurred: direct labor, $331,000; indirect labor, $74,000; and administrative salaries, $153,000.

• Selling costs, $112,000.

• Factory utility costs, $25,000.

• Depreciation for the year was $124,000 of which $114,000 is related to factory operations and $10,000 is related to selling, general, and administrative activities.

• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 14,100 machine-hours

• Sales for the year totaled $1,290,000.

Required:

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

b. Was the overhead underapplied or overapplied? By how much?

c.Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold.

Explanation / Answer

Answer:a Schedule of cost of goods manufactured:

Answer:b Overhead underapplied or overapplied:

Answer:c Income Statement:

Estimated Total manufacturing overhead (a) 265500 Estimated total machine hours (b) 17700 Predetermined overhead rate (a)/(b) 15 Actual total machine hours (a) 14100 Predetermined overhead rate (b) 15 Overhead applied (a*b) 211500 Direct materials: Raw material inventory, beginning 11400 Add: Purchases of raw materials 411000 Total raw material available 422400 Less: Raw material inventory, ending 15600 Raw material used in production 406800 Less: indirect materials 20800 Direct materials 386000 Direct labor 331000 Manufacturing overhead applied 211500 Total manufacturing costs 928500 Add: Beginning WIP 32600 Less: Ending WIP 14300 Cost of goods manufactured 946800

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