Question

The following cost data relate to the manufacturing activities of Black Company during the just-completed year:

Manufacturing overhead costs:
Property taxes, factory	$	4,200
Utilities, factory		6,800
Indirect labour		12,400
Depreciation, factory		27,000
Insurance, factory		8,400
Total actual manufacturing overhead costs	$	58,800
Other costs incurred:
Purchases of raw materials.	$	38,000
Direct labour cost	$	48,400
Inventories:
Raw materials, beginning	$	10,400
Raw materials, ending	$	8,200
Work in process, beginning	$	7,800
Work in process, ending	$	9,900

The company uses a predetermined overhead rate to apply overhead cost to production. The rate for the year was $6 per machine-hour; a total of 10,000 machine-hours were recorded for the year. All raw materials ultimately become direct materials—none are classified as indirect materials.

Required:

1. Compute the amount of underapplied or overapplied overhead cost for the year.

2. Prepare a schedule of cost of goods manufactured for the year.

Answer 1

1.

Predetermined overhead rate = $6 per machine hour

Actual machine hours = 10,000

Overhead applied = Predetermined overhead rate x Actual machine hours

= =6 x 10,000

= $60,000

Actual manufacturing overhead = $58,800

Over applied manufacturing overhead = Overhead applied - Actual manufacturing overhead

= 60,000-58,800

= $1,200

2.

Schedule of Cost of Goods Manufactured
Beginning raw material inventory	10,400
Purchase of raw material	38,000
Total raw materials available	48,400
Ending raw material inventory	-8,200
Raw material used	40,200
Direct labor	48,400
Manufacturing Overheads applied	60,000
Total Manufacturing Cost	148,600
Beginning work in process inventory	7,800
Ending work in process inventory	-9,900
Cost of goods manufactured	146,500

cost of goods manufactured for the year = $146,500

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