1. Luzadis Company makes furniture using the latest automated technology. The co

Question

1. Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per computer-hourS320 83,000 $1,271,000 During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year Machine-hours Manufacturing overhead cost Inventories at year-end 50,000 $ 1,000,000 Raw materials Work in process (includes overhead applied of 55,530) Finished goods (includes overhead applied of 277,650) $ 400,000 S 140,000 $ 1,020,000 $ 2,750,000 Cost of goods sold (includes overhead applied of 592,320) Required: 1 Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.) Answer is complete and correct. Predetermined overhead 1851per our

Explanation / Answer

Luzadis Company Predetermined Rate for the year=Estimated Manufacturing Overhead/Estimated total units of the allocation base Total Manufacturing Overhead Variable Overhead=(83000 Hours*$3.20) $      265,600.00 Fixed Overhead $ 1,271,000.00 Total Manufacturing Overhead $ 1,536,600.00 Estimated Total Machine Hours 83000 1) Predetermined Rate for the year=($1536600/83000) $                18.51 Per Hours 2) Underapplied/Overapplied Overhead Total Manufacturing Overhead applied to WIP=(50000*18.51) $      925,662.65 Actual Manufacturing Overhead= $ 1,000,000.00 Underapplied Overhead=($1000000-$925662.7) $        74,337.35 3) General Journal Particular Amount (Dr) Amount (Cr) Cost of goods sold $        74,337.35     To Manufacturing Overhead $     74,337.35 4) Overhead applied during the year in: Work In Process $        55,530.00 6% Finished Goods $      277,650.00 30% Cost of Goods sold $      592,320.00 64% Total $      925,500.00 100% 5) General Journal Particular Amount (Dr) Amount (Cr) WIP=($74337.35*6%) $          4,460.24 Finished Goods=($74337.35*30%) $        22,301.20 Cost of goods sold=($74337.35)*64% $        47,575.90      To Manufacturing Overhead $     74,337.35 6) Cost of goods sold if the underapplied overhead is closed directly to cost of goods sold=($2750000+$74337.35) $ 2,824,337.35 Cost of goods sold if the underapplied overhead is allocated among the accounts=($2750000+$47575.90) $ 2,797,575.90 Difference in cost of goods sold $        26,761.45

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