Question

ABC Company applies overhead to products using a pre-determined rate of 125%
of direct labor cost. ABC Company's accounting records for 2019 indicated the
following costs had been incurred:

Direct materials purchased ................... $122,000
Depreciation, factory equipment ..............   33,000
Direct labor .................................     ?
Utilities.....................................     ?
Sales commissions.............................   52,000
Indirect materials............................   11,000
Depreciation, office equipment ...............     ?
Production supervisor's salary ...............   57,000
Advertising...................................   66,000

60% of the utilities relate to the factory while 40% of the utilities relate
to the general office building.

ABC Company's inventory accounts had the following balances during 2019:

                     January 1, 2019        December 31, 2019
Direct materials          50,000                  36,000
Work in process           22,000                  41,000
Finished goods            38,000                  35,000

For 2019, ABC Company reported sales revenue of $527,000; an unadjusted cost
of goods sold of $331,500; an adjusted cost of goods sold of $328,200; and
net income of $45,000

Calculate ABC Company's depreciation, office equipment cost for 2019.

Answer 1

cost of goods manufactured =Unadjusted cost of goods sold +Ending FG - Beginning FG

         = 331500+35000-38000

        = 328500

Total manufacturing cost = Ending WIP +Cost of goods manufactured- beginning WIP

                      = 41000+328500 -22000

                       = 347500

Direct material used: 50000+122000- 36000 = 136000

Direct labor cost : x"

Overhead applied :x *125% =1.25x

Total manufacturing cost =Direct material +direct labor +overhead

              347500 = 136000 +x +1.25x

              347500-136000= 2.25x

                x = 94000

Direct labor cost : 94000

Overhead applied : 94000*1.25% = 117500

Overhead overapplied :331500-328200=3300

Actual overhead :   117500-3300 = 114200

Actual overhead :utilities factory +Indirect material +supervisor salary

114200 =U +11000 +57000

Utilities factory : 46200                 [which represent 60% itself ]

Utilities cost for 2019 = 46200 /.60 = $ 77000

Utilites -general : 77000-46200= 30800

sales	527000
less: adjusted cost of goods sold	(328200)
Gross margin	198800
lesS: Utilities	(30800)
sales commission	(52000)
Depreciation, office equipment	y
Advertising.	(66000)
Net income	45000

45000 = 198800-30800-52000-y-66000

y =49200-45000

depreciation = $ 4200