Question

18. Baab Cor inventory bala Corporation is a manufacturing firm that uses loborder costing The Commons balances were as follows at the beginning and end of the year Raw materials $ Work in process $ Finished Goods $ atthew Minor Beginning Balance Ending Balance 14,000 $ 22,000 27,000 $ 9,000 62,000 $ 77,000 The company applies overhead to jobs using a predetermined overhe At the beginning of the year, the company estimated that it would work 33,000 m incur $231,000 in manufacturing overhead cost. The following 1. Raw materials were purchased. $315,000 2. Raw materials were requisitioned for use in production, $26,000 indirect). using a predetermined overhead rate based on machine-hours acturing overhead costated that it would work 33,000 machi mashine ho ad cost. The following transactions were recorded for the year The following employee costs were incurred: direct lab administrative salaries, $172,000. se in production, $307,000 ($281.000 direct and yee costs were incurred: direct labor, $377,000; indirect labor, 596,000; and 3. Selling costs, $147,000 4. Factory utility costs, $10,000 5. Depreciation for the year was $127.000 of which $120.000 is related to factory operations and $7,000 is related to selling general, and administrative activities Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34.000 machine-hours. Sales for the year totaled $1,253,000 Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead underapplied or overapplied? By how much? c. Make a Journal Entry to close the MOH account. c. Prepare an income statement for the year. 40 pt

please explain

Answer 1

a.

Cost of goods manufactured is computed as follows:

B. Co.
Cost of goods manufactured
Particulars	Amount
Direct materials used in production	281000
Direct Labor	377000
Manufacturing Overhead applied (34000* 231000/33000)	238000
Total Manufacturing Costs	896000
Add Beginning Work in Process	27000
Sub total	923000
Less Ending Work in Process	-9000
Cost of Goods Manufactured	$914000

2.Calculate total actual overhead as follows:

Total actual overhead = Indirect materials + Indirect labor + Factory utility costs + Depreciation

Total actual overhead = 26000 + 96000 + 10000 + 120000

Total actual overhead = $252000

Application of overhead = Actual overhead - Applied overhead

Application of overhead = 252000 - 238000

Application of overhead = $14000 (Under-applied)

c.

Journal entry:

Particulars	Debit	Credit
Cost of goods sold	14000
Manufacturing overhead		14000
(To record under-applied overhead)

d.

Income statement:

B. Co.
Income statement
Particulars	Amount	Amount
Sales revenue		1253000
Less: Cost of goods sold
Beginning finished goods inventory	62000
Add: cost of goods manufactured	914000
Less: Ending finished goods inventory	-77000
Under-applied overhead	899000
Cost of goods sold	14000	-913000
Gross margin		340000
Less: selling expenses	-147000
Less: Administrative expenses	-172000	-319000
Net income		21000