Question

Baab Corporation is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Beginning Ending Balance Balance $ 14,350 $22,350 $ 27,350 $ 9,350 $ 62,350 $77,350 Raw materials Work in process Finished Goods (8 01:18:06 The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,350 machine-hours and incur $256,795 in manufacturing overhead cost. The following transactions were recorded for the year: • Raw materials were purchased, $315,350. • Raw materials were requisitioned for use in production, $307,350 ($280,650 direct and $26.700 indirect). • The following employee costs were incurred: direct labor, $377,350; indirect labor, $96,350; and administrative salaries, $172,350. • Selling costs, $147,350. • Factory utility costs, $10.350. Depreciation for the year was $148,000 of which $131,000 is related to factory operations and $17,000 is related to selling, general, and administrative activities. • Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,070 machine-hours. • Sales for the year totaled $1,267,000. Required: Mc Graw Hill Education < Prey 6 of 20 Next > e o & exw O - O ) ENG 3:27 PM

Answer 1

Part.1

	Baab Corporation
	Schedule of Cost of Goods Manufactured
	Direct Material
	Opening	14350
Add	Purchased	315350
	Total Raw Material Available	329700
Less:	Closing Raw Material	-22350
Less:	Indirect Raw Material used in Production	-26700
	Raw Material used in production (A)	280650
	Direct Labour       (B)	377350
	Factory Overhead applied ($7.7[Note.1]*34070) (C )	262339
	Total manufacturing costs (A+B+C)	920339
Add	Opening Work in Progress	27350
Less:	Closing Work in Progress	-9350
	Cost of goods manufactured	938339
Note.1	Factory Overhead Recovery Rate = Budgeted Factory Overhead/Machine Hours
		=256795/33350		=	$       7.70

Part. 2

	Computation of Manufacturing Overhead Incurred
	Indirect Material	26700
	Indirect Labour	96350
	Factory Utilities Cost	10350
	Depreciation	131000
	Total Manufacturing Overhead	264400
	Manufacturing Overhead Under or Over applied = Actual Manufacturing Overhead Incurred - Manufacturing Overhead applied
		=	264400	-	262339	=	2061	Underapplied

Part 3

	Baab Corporation
	Income Statement
	Sales		1267000
Add:	Closing Finised Goods	77350
Less:	Opening Finished Goods	-62350
			15000
Less:	Selling & Administrative Expense
	Administrative Salaries	172350
	Depreciation relating to the selling, general & administrative activities	17000
	Selling Costs	147350
			-336700
Less:	Underapplied Overheads		-2061
Less:	Cost of Goods Manufactured		-938339
	Profit/Loss		4900