Question

The following cost data relate to the manufacturing activities of Chang Company during the just completed year:

Manufacturing overhead costs incurred:
Indirect materials	$	15,000
Indirect labor		130,000
Property taxes, factory		8,000
Utilities, factory		70,000
Depreciation, factory		240,000
Insurance, factory		10,000
Total actual manufacturing overhead costs incurred	$	473,000
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	400,000
Direct labor cost	$	60,000
Inventories:
Raw materials, beginning	$	20,000
Raw materials, ending	$	30,000
Work in process, beginning	$	40,000
Work in process, ending	$	70,000

The company uses a predetermined overhead rate of $25 per machine-hour to apply overhead cost to jobs. A total of 19,400 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.

Answer 1

SOLUTION : 1
	COMPUTATION OF UNDERAPPLIED OR OVERAPPLIED OVERHEAD
	Applied predetermined overhead = 19,400 Hrs X $ 25 Per mahcine hrs =		$           4,85,000
	Less: Actual overhead		$           4,73,000
	Underapplied overhead		$              12,000
	Answer = Underapplied overhead = $ 13,000
SOLUTION : 2
	COST OF GOODS MANUFACTURED
		Amount	Amount
	Current manufacturing costs:
	Cost of materials placed in production:
	Opening Raw materials	$               20,000
	Add: Purchases	$           4,00,000
	Total Available for Sale	$           4,20,000
	Closing Raw materials	$               30,000	$           3,90,000
	Manufacturing Overhead
	Direct Labor cost	$               60,000
	Indirect Materials	$               15,000
	Indirect Labour	$           1,30,000
	Property taxes - Factory	$                 8,000
	Utilities - Factory	$               70,000
	Depreciation - Factory	$           2,40,000
	Insuracne - Factory	$               10,000
			$           5,33,000
	Opening Work-in-process,		$              40,000
	Total costs in process		$           9,63,000
	Ending Work-in-process		$              70,000
	Cost of goods manufactured		$           8,93,000