b. The following costs were incured for employee services 5 11,000 $ 28,000 d. I

Question

b. The following costs were incured for employee services 5 11,000 $ 28,000 d. In the e. Total Note: only, heat, power, and water costs incurred in the ncordad lor the year was S61.000 Note: O, the total deprecation recorded80% relates to factory operators, and 20% relates to sekgvdadmistrove acte h. Sales for the year totaled $702.000. The total cost to manufacture these goods according to their job cost sheets was $476,000 L. The company actually used 41,000 during the year. overhead rate to 2 decimal places.)

Explanation / Answer

1 Overapplied/(Underapplied) overhead=Applied overhead-Actual overead Overhead allocation rate=Budgeted manufacturing overhead for the year/Budgeted machine hours for the year=159100/37000=$ 4.3 per machine hour Applied overhead=Actual machine hours*Overhead allocation rate=41000*4.3=$ 176300 Actual overhead: Indirect materials (191000*25%) 47750 Indirect labor 19000 Insurance cost (11000*85%) 9350 Heat,power and water 35000 Depreciation (61000*80%) 48800 Total Actual overhead 159900 Note: Overhead cost includes only costs which are directly related to factory operations.It excludes sales commission.administrative salaries,advertising costs etc. Overapplied overhead=176300-159900=$ 16400 2 Income statement $ Sales 702000 Less: Adjusted cost of goods sold Cost of goods sold (Note:1) 476000 Overapplied overhead (Note:2) -16400 459600 Gross profit 242400 Less: Selling and administrative expenses Sales commissions 11000 Administrative salaries 26000 Insurance cost (11000*15%) 1650 Depreciation (61000*20%) 12200 Advertising cost 51000 101850 Net profit 140550 Note: 1. Cost to manufacture the goods sold are given.Hence cost to manufacture=Cost of goods sold 2. Overapplied overhead will reduce the cost of goods sold balance

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