Mariya Company uses a job-order costing system and applies manufacturing overhea

Question

Mariya Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $233,450 of manufacturing overhead for an estimated allocation base of $161,000 direct material dollars. The following transactions took place during the year (all purchases and services were acquired on account) a. Raw materials purchased, $148,000. b. Raw materials requisitioned for use in production (all direct materials), $144,000. c. Utility bills incurred in the factory, $27,000. d. Costs for salaries and wages were incurred as follows: Direct labor $229,000 Indirect labor 63.200 Selling and administrative salaries 146,000 e. Maintenance costs incurred in the factory, $18,500 f. Advertising costs incurred, $131,000. g. Depreciation recorded for the year, $46,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets) h. Rental cost incurred on buildings, $88,000 (80% of the space is occupied by the factory, and 20% is occupied by sales and administration) i. Miscellaneous selling and administrative costs incurred, $12,500. j. Manufacturing overhead cost was applied to jobs, $ ? k. Cost of goods manufactured for the year, $570,000 l. Sales for the year (all on account) totaled $1,130,000. These goods cost $545,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were as follows: Raw materials Work in process Finished Goods $ 26,000 $ 27,000 $ 37,000

Explanation / Answer

Predetermined overhead rate = 233450/161000 145% Schedule for manufacturing cost beginning raw material 26000 Add Purchase of raw material 148000 Total 174000 Less Ending Raw material 30000 Raw material used in production 144000 Direct labor 229000 manufacturing cost applied 208800 (144000*145%) Total manufacturing cost 581800 Add Beginning work in progress 27000 608800 less Ending work in progress 38800 Cost of goods manufactured 570000 Add Beginning finished goods inventory 37000 Cost of goods available for sale 607000 Less Ending finished goods inventory 62000 unadjusted Cost of goods sold 545000 Add Under applied overheads 2500 Cost of goods sold 547500 Schedule for net income Sales revenue 1130000 Less Cost of goods sold unadjusted Cost of goods sold 545000 Under applied manufacturing OH 2500 547500 Gross profit 352900 Less Expenses Selling and administrative salaries 146000 Advertising cost 131000 Depreciation cost 13800 Rent cost 17600 Misc. 12500 320900 Net operating income 32000 Manufacturing overheads Utility bill 27000 Maintenance cost 18500 Depreciation of factory overheads 32200 Rent cost 70400 Indirect labor 63200 Total manufacturing cost incurred 211300 Manufacturing cost applied 208800 Under applied Manufacturing cost 2500 Cost of goods sold 2500                 Manufacturing overheads 2500

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