The following cost data relate to the manufacturing activities of Chang Company

Question

The following cost data relate to the manufacturing activities of Chang Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials Indirect labor Property taxes, factory Utilities, factory Depreciation, factory Insurance, factory Total actual manufacturing overhead costs incurred 15,700 137,000 8,700 77,000 270,900 10,700 $520,000 Other costs incurred: Purchases of raw materials (both direct and indirect) Direct labor cost $407,000 $67,000 Inventories: Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending $20,700 30,700 $40,700 $70,700 The company uses a predetermined overhead rate of $26 per machine-hour to apply overhead cost to jobs. A total of 20,400 machine-hours were used during the year Required: 1. Compute the amount of underapplied or overapplied overhead cost for the year. 2. Prepare a schedule of cost of goods manufactured for the year.

Explanation / Answer

1 Actual Manufacturing overhead costs 520000 Manufacturing overhead applied 530400 =20400*26 Overapplied overhead cost 10400 2 Schedule of Cost of Goods Manufactured Direct materials: Raw materials inventory, beginning 20700 Add: Purchases of raw materials 407000 Raw materials available for use 427700 Less: Raw materials inventory, ending 30700 Raw materials used in production 397000 Less: Indirect materials 15700 381300 Direct labor 67000 Manufacturing overhead cost applied to work in process 530400 Total manufacturing costs 978700 Add: Work in process inventory, beginning 40700 1019400 Less: Work in process inventory, ending 70700 Cost of goods manufactured 948700

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