Problem 4-32 (Part Level Submission) Waterway Wings, Inc. manufactures airplanes

Question

Problem 4-32 (Part Level Submission)

Waterway Wings, Inc. manufactures airplanes for use in stunt shows. Waterway’s factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Waterway uses a job order costing system to accumulate product costs.

At the end of 2016, Waterway’s accountants developed the following expectations for 2017 based on the marketing department’s sales forecast:

Waterway’s inventory count, completed on December 31, 2016, revealed the following ending inventory balances:

The company’s 2017 payroll data revealed the following actual payroll costs for the year:

The following information was taken from Waterway’s Schedule of Plant Assets. All assets are depreciated using the straight-line method.

Other miscellaneous costs for 2017 all paid in cash included:

Additional information about Waterway’s operations in 2017 includes the following:

Waterway uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000. All sales are made on account.
(Note: This transaction requires two journal entries.)

Was manufacturing under or overapplied in 2017? By how much?
Overheads- Overapplied By 293,863

If Waterway chooses instead to prorate under- or overapplied overhead, what are the adjusted Work in Process Inventory, Finished Goods Inventory and Cost of Goods Sold account balances for 2017? (Round % of total to 2 decimal places, e.g. 55.75 and final answers to 0 decimal places, e.g. 5,275.)

Budgeted overhead cost $1,099,000 Estimated machine hours 41,000 Estimated direct labor hours 12,000 Estimated direct materials cost $1,520,000

Explanation / Answer

Predeterminedoverhead rate = Budgeted overhead cost /Estimated direct materialscost =1099000/1520000= 72.30%                        

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