Exercise 3-7 Applying Overhead; Cost of Goods Manufactured [LO3-3, LO3-4] The fo
ID: 2335812 • Letter: E
Question
Exercise 3-7 Applying Overhead; Cost of Goods Manufactured [LO3-3, LO3-4] The following cost data relate to the manufacturing activities of Chang Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials Indirect labor Property taxes, factory Utilities, factory Depreciation, factory Insurance, factory Total actual manufacturing overhead costs incurred $16,500 145,000 9,500 85,000 231,700 11,500 $499,200 Other costs incurred: Purchases of raw materials (both direct and indirect) Direct labor cost $415,000 $75,000 Inventories: Raw materials, beginning Raw materials, ending Work in process, beginning Work in process, ending 21,500 $31,500 $41,500 $71,500 The company uses a predetermined overhead rate of $24 per machine-hour to apply overhead cost to jobs. A total of 21,200 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.Explanation / Answer
Chang Company
Cost of Goods Manufactured
Direct Material
Beginning Raw material Inventory
$ 21,500.00
Add: Raw material Purchased
$ 415,000.00
Total raw material Available
$ 436,500.00
Less: Ending Raw material Inventory
$ 31,500.00
Direct Material Used
$ 405,000.00
Direct labor
$ 75,000.00
Manufacturing overheads applied to the work in process
$ 499,200.00
Total manufacturing cost
$ 979,200.00
Add: Beginning work in process
$ 41,500.00
Total work in process
$ 1,020,700.00
Less: Ending work in process
$ 71,500.00
Cost of Goods Manufactured
$ 949,200.00
All the things are correct in the answer except for one thing that is manufacturing overheads.
Manufacturing Overheads applied were incorrect. Actual manufacturing overheads will be posted to cost of goods manufactured Statement.
Chang Company
Cost of Goods Manufactured
Direct Material
Beginning Raw material Inventory
$ 21,500.00
Add: Raw material Purchased
$ 415,000.00
Total raw material Available
$ 436,500.00
Less: Ending Raw material Inventory
$ 31,500.00
Direct Material Used
$ 405,000.00
Direct labor
$ 75,000.00
Manufacturing overheads applied to the work in process
$ 499,200.00
Total manufacturing cost
$ 979,200.00
Add: Beginning work in process
$ 41,500.00
Total work in process
$ 1,020,700.00
Less: Ending work in process
$ 71,500.00
Cost of Goods Manufactured
$ 949,200.00
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