Multifaceted Corporation uses job-order costing and applies overhead cost to job
ID: 2560613 • Letter: M
Question
Multifaceted Corporation uses job-order costing and applies overhead cost to jobs on the basis of machine-hours worked. For the just completed year, the company estimated that it would work 75,000 machine hours and incur $450,000 in factory overhead cost. The company actually worked 80,000 machine hours. The company has provided the following financial data concerning its actual operations for the year:
Direct materials
$355,000
Indirect materials
$ 22,000
Direct labor
$ 76,000
Indirect labor
$112,000
Sales commissions
$ 91,000
Administrative salaries
$190,000
General selling expenses
$18,000
Factory utility costs
$44,000
Advertising costs
$175,000
Factory depreciation
$282,000
Selling/Admin depreciation
$71,000
Factory insurance
$7,500
Selling/Admin insurance
$3,200
Cost of goods sold (unadjusted)
$872,000
Sales
$1,510,000
1. Calculate the amount by which overhead is under or over-applied for the year. Is it under or over-applied?
2. Prepare an income statement in proper form for the year.
Direct materials
$355,000
Indirect materials
$ 22,000
Direct labor
$ 76,000
Indirect labor
$112,000
Sales commissions
$ 91,000
Administrative salaries
$190,000
General selling expenses
$18,000
Factory utility costs
$44,000
Advertising costs
$175,000
Factory depreciation
$282,000
Selling/Admin depreciation
$71,000
Factory insurance
$7,500
Selling/Admin insurance
$3,200
Cost of goods sold (unadjusted)
$872,000
Sales
$1,510,000
Explanation / Answer
1. Calculate the amount by which overhead is under or over-applied for the year. Is it under or over-applied?
Actual overhead : (22000+112000+44000+282000+7500)=467500
PRedetermine overhead rate = 450000/75000 =6 per machine hour
Applied overhead = 80000*6=480000
Over applied overhead = 480000-467500 = 12500
2. Prepare an income statement in proper form for the year.
Sales 1510000 Less: Cost of goods sold (adjusted) (859500) Gross profit 650500 Less: Operating expenses Sales commissions (91000) Adminstrative exp (190000) General selling expenses (18000) Advertising costs (175000) Selling/Admin depreciation (71000) Selling/Admin insurance (3200) (548200) Net operating income 102300Related Questions
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