Problem 4 Applying Overhead, Cost of Goods Manufactured The following cost data

Question

Problem 4 Applying Overhead, Cost of Goods Manufactured The following cost data relate to the manufacturing activities of Black Company during the just-completed year Manufacturing overhead costs: Property taxes, factory Utilities, factory Indirect labour Depreciation, factory Insurance, factory Total actual manufacturing overhead costs 3,000 5,000 10.000 24,000 6,000 $48.000 Other costs incurred: Purchases of raw materials Direct labour cost $32,000 $40,000 Inventories: Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending $7,000 $8,000 $6,000 $7,500 The company uses a predetermined overhead rate to apply overhead cost to production. The rate for the year was $5 per machine-hour, a total of 10,000 machine- hours were recorded for the year. All raw materials ultimately become direct materials- none are classified as indirect materials. Required: 1. Compute the amount of under-applied or over-applied overhead cost for the year. 2. Prepare a schedule of cost of goods manufactured for the year

Explanation / Answer

1 Actual Manufacturing overhead costs 48000 Manufacturing overhead applied: 50000 Overapplied overhead cost 2000 2 Schedule of Cost of Goods Manufactured Direct materials: Raw materials inventory, beginning 7000 Add: Purchases of raw materials 32000 Raw materials available for use 39000 Less: Raw materials inventory, ending 8000 Raw materials used in production 31000 Direct labor 40000 Manufacturing overhead cost applied to work in process 50000 Total manufacturing costs 121000 Add: Work in process inventory, beginning 6000 127000 Less: Work in process inventory, ending 7500 Cost of goods manufactured 119500

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