Question

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

Manufacturing overhead costs incurred:
Indirect materials	$	15,600
Indirect labor		136,000
Property taxes, factory		8,600
Utilities, factory		76,000
Depreciation, factory		250,700
Insurance, factory		10,600
Total actual manufacturing overhead costs incurred	$	497,500
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	406,000
Direct labor cost	$	66,000
Inventories:
Raw materials, beginning	$	20,600
Raw materials, ending	$	30,600
Work in process, beginning	$	40,600
Work in process, ending	$	70,600

The company uses a predetermined overhead rate of $25 per machine-hour to apply overhead cost to jobs. A total of 20,300 machine-hours were used during the year.

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

Answer 1.

Amount of underapplied or overapplied overhead cost for the year = Overapplied by $10,000

Explanation:

Total actual manufacturing overhead costs incurred	$497,500
Applied manufacturing overhead (20,300 MH * $25 MH)	$507,500
Overapplied (Since Applied manufacturing overhead is more than Actual manufacturing overhead)	$10,000

Answer 2.

Chang Company

Schedule of Cost of Goods Manufactured for the year

Direct materials
Raw materials, beginning	$20,600
Add: Purchases of raw materials	406,000
Raw materials available for use	426,600
Less: Raw materials, ending	30,600
Raw materials used in production	396,000
Less: Indirect materials	15,600	$380,400
Direct labor		66,000
Manufacturing overhead cost applied		507,500
Total manufacturing costs		953,900
Add: Work in process, beginning		40,600
		994,500
Less: Work in process, ending		70,600
Cost of Goods Manufactured		$923,900