ers 2 to 4) Risser overhead rate is based on capacity. The capacity of the facto

Question

ers 2 to 4) Risser overhead rate is based on capacity. The capacity of the factory Additional information is provided below for the most recent month Help Save & Exit $ ing Corporation produces fine cabinets. The company uses a job-order costing system in which its is determined by the capacity of its constraint, which is an automated jointer predetermined Estimates at the beginning of the month: Estimated total fixed manufacturing overhead Capacity of the jointer $14,256 Actual results: 240 hours Sales Direct materials Direct labor Actual total fixed manufacturing overhead Selling and administrative expense Actual hours of jointer use 62,310 $14,100 $16,000 $14,256 220 hours The gross margin that would be reported on the income statement prepared for internal management purposes would be closest to Cholce

Explanation / Answer

Solution: Answer is 2nd option $19,142 Working Notes: Predetermined overhead rate = estimated overhead / estimated jointer capacity =$14,256/240 =$59.40 per hour Computation of gross margin Sales 62,310 Less: Direct materials 14,100 Direct labor 16,000 Manufacturing Overhead applied 13,068 43,168 [Predetermine OH rate x Actual hours of jointer use ] [$59.40 x 220] Gross margin 19,142 Please feel free to ask if anything about above solution in comment section of the question.

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