Question

snill Alt PriSc Ctri 3. Bakerston Company is a manufacturing firm that uses job-order costing. The company's inventory bal- ances were as follows at the beginning and end of the year: Ending Balance $22,000 $9,000 $77,000 Beginning Balance $14,000 $27,000 $62.000 Raw materials Work in process Finished goods 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 33,000 machine-hours and incur $231,000 in manufacturing overhead cost. The following transactions were recorded for the year Raw materials were purchased, $315.000-(there were no Indirect Materials at this company). The following employee costs were incurred: direct labor, $377,612; indirect labor, $95,110; and ad- ministrative salaries, $172,000. Selling costs, $147,887. Factory utility costs, $10.919. 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 levelof activity for the year was 31,823 ma- chine-hours. (Hint: you must calculate the predetermined overhead rate per machine hours and use it to apply overhead) Required (3 Points): a. Prepare a schedule of cost of goods manufactured. Calculate Cost of Goods Sold (do not close the over- or under-applied Mfg. Overhead). b. c Was the overhead underapplied or overapplied? By how much?

Answer 1

a.

Bakerston Company Schedule of Cost of Goods Manufactured
For the year ended......
Cost of Raw Materials Consumed
Beginning Raw Materials	14,000
Add: Purchases	315,000
Less: Ending Raw Materials	(22,000)	307,000
Direct Labor		377,612
Manufacturing Overhead Applied ( 31,823 machine hours x $ 7 )		222,761
Total Manufacturing Costs		907,373
Add: Beginning Work in Process		27,000
Total Cost of Work in Process		934,373
Less: Ending Work in Process		(9,000)
Cost of Goods Manufactured		$ 925,373

b. Cost of Goods Sold: $ 910,373.

Bakerston Company Schedule of Cost of Goods Sold
Beginning Finished Goods	$ 62,000
Add: Cost of Goods Manufactured	925,373
Cost of Goods Available for Sale	987,373
Less: Ending Finished Goods	(77,000)
Cost of Goods Sold	$910,373

c. Manufacturing overhead incurred = $ 226,029

Manufacturing overhead applied = $ 222,761

Manufacturing underapplied = $ 222,761 - $ 226,029 = $ 3,268

Indirect labor	$ 95,110
Factory utility costs	10,919
Depreciation	120,000
Total Manufacturing Overhead Incurred	$ 226,029