Applying Overhead; Cost of Goods Manufactured [L02, L06, L07] The following cost
ID: 2350858 • Letter: A
Question
Applying Overhead; Cost of Goods Manufactured [L02, L06, L07] The following cost data relate to the manufactoring activities of Black Company during the just completed year: The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $5 per machine-hour; a total of 10,000 machinhourswas recorded for the year. All raw materials ultimately become direct materials-none are classified as indirect materials. Required: Compute the amount of underapplied or overapplied overhead cost for the year. Prepare a schedule of cost of goods manufactured for the year.Explanation / Answer
1.
Overhead rate = 10000*5 = $50,000
Actual result:
32000+40000+8000-7000+6000-7500
= $71,500
Under-applied (when actual expenditure is more than predetermined) Overhead rate therefore = 71,500-50,000 = $21,500 Answer
2.
Black Company Manufacturing Account for the year
$ $
Direct Materials Inventory beginning 8000
Purchases of raw materials 32000
40,000
Less Direct Materials Inventory closing (7000) 33000
Direct Labour 40000
Prime Cost 73000
Indirect Costs:
Property taxes, factory 3000
Utilities, factory 5000
Indirect Labor 10000
Depreciation 24000
Insurance, factory 6000
Total actual manufacturing overheads 48000
(73000 + 48000) 121,000
Work in progress beginning 6000
Work in progress closing (7500) (1,500)
Total cost of manufactured goods 119,500 (Answer)
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