Huxtable charges manufacturing overhead to products by using a predetermined app

Question

Huxtable charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year:

Budgeted manufacturing overhead: $577,500
Actual manufacturing overhead: $ 532,600
Budgeted machine hours: 27,500
Actual machine hours: 23,020
Overhead applied to production totaled:

Multiple Choice

$ 451,420.

$ 483,420.

$ 649,420.

$ 699,420.

some other amount.

2)

Fletcher, Inc. disposes of under- or overapplied overhead at year-end as an adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods sold of $640,000 in a year when manufacturing overhead was underapplied by $23,500. If sales revenue totaled $2,320,000, determine (1) Fletcher's adjusted cost of goods sold and (2) gross margin.

Multiple Choice

Choice A

Choice B

Choice C

Choice D

Choice E

Adjusted Cost
of Goods Sold Gross Margin A.         $ 616,500 $ 1,680,000 B.         $ 616,500 $ 1,703,500 C.         $ 640,000 $ 1,680,000 D.         $ 663,500 $ 1,656,500 E.         $ 663,500 $ 1,680,000

Explanation / Answer

1) Calculate overhead applied :

Overhead rate = 577500/27500 = 21 per machine hour

Overhead applied = 23020*21 = 483420

so answer is b) $483420

2) adjusted cost of goods sold = 640000+23500 = 663500

Gross margin = 2320000-663500 = 1656500

so answer is d) Choice D

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