10.00 points Durham Company uses a job-order costing system. The following trans
ID: 2570481 • Letter: 1
Question
10.00 points Durham Company uses a job-order costing system. The following transactions took place last year a. Raw materials requisitioned for use in production, $56,000 (75% died and 25% indirect). b. Factory utlity costs incurred, $16,200 c. Depreciation recorded on plant and equipment, $31,200. Three-fourths of the depreciation relates t d. Costs for salaries and wages were incurred as follows: factory equipment, and the remainder relates to selling and administrative equipment Direct labor Indirect laber S 56,000 s 19,600 11,600 41,000 Administrative salaries e. Insurance costs incurred, $6200(75% relates to factory operations, and 25% relates seling and admnstrate activies). t. Miscellaneous selling and administraive expenses incurred, $19,600 g. Manufacturing overhead was applied to production. The company apples overhead on the basis of 130% odrect labor cost h. Goods that cost $146,000 to manufacture according to their job cost sheets were transfemed to the finished goods warehouse. . Goods that had cost $136,000 to manufacture according to their job cost sheets were sold for $232,000 Required: 1. Determine the underapplied or overapplied overhead for the yearExplanation / Answer
Solution:
Calculation of Expenses
Direct Raw Material
Direct Labor
Manufacturing Overhead
Selling and Administrative Expense
a)
Raw Material issued
$42,000
$14,000
(56000*75%)
(56000*25%)
b)
Factory Utility Cost
$16,200
c)
Depreciation
$23,400
$7,800
(31200*3/4)
(31200*1/4)
d)
Direct labor
$56,000
Indirect labor
$19,600
Sales Commission
$11,600
Administrative salaries
$41,000
e)
Insurance Cost
$4,650
$1,550
(6200*75%)
(6200*25%)
f)
Misc Selling & Admn
$19,600
TOTAL
$42,000
$56,000
$77,850
$81,550
1) Under or Over Applied Overhead
Actual Overhead Incurred = $77,850
Applied Overhead = Direct labor cost $56,000 * 130% = $72,800
Applied Overheads are less than Actual Overhead, hence the overheads are under applied by $5,050 (77,850 – 72,800)
2) Income Statement
Income Statement
Sales
$232,000
Less: Cost of Goods Sold
$136,000
Gross Profit
$96,000
Less: Selling and administrative expense
$81,550
Operating Profit
$14,450
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Direct Raw Material
Direct Labor
Manufacturing Overhead
Selling and Administrative Expense
a)
Raw Material issued
$42,000
$14,000
(56000*75%)
(56000*25%)
b)
Factory Utility Cost
$16,200
c)
Depreciation
$23,400
$7,800
(31200*3/4)
(31200*1/4)
d)
Direct labor
$56,000
Indirect labor
$19,600
Sales Commission
$11,600
Administrative salaries
$41,000
e)
Insurance Cost
$4,650
$1,550
(6200*75%)
(6200*25%)
f)
Misc Selling & Admn
$19,600
TOTAL
$42,000
$56,000
$77,850
$81,550
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