Question

Exercise 2-12 Applying Overhead; Cost of Goods Manufactured [LO2-2, LO2-6, LO2-7]

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

    

Manufacturing overhead costs incurred:
Indirect materials	$	16,200
Indirect labor		142,000
Property taxes, factory		9,200
Utilities, factory		82,000
Depreciation, factory		169,900
Insurance, factory		11,200
Total actual manufacturing overhead costs incurred	$	430,500
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	412,000
Direct labor cost	$	72,000
Inventories:
Raw materials, beginning	$	21,200
Raw materials, ending	$	31,200
Work in process, beginning	$	41,200
Work in process, ending	$	71,200

  

The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $21 per machine-hour. A total of 20,900 machine-hours was recorded for the year.

   

Required:

1.	Compute the amount of underapplied or overapplied overhead cost for the year. overhead cost over or under? and how much is the actual cost amount?

2.	Prepare a schedule of cost of goods manufactured for the year. Chang Company Schedule of Cost of Goods Manufactured Direct materials: Raw materials available for use 0 Raw materials used in production 0 $0 Total manufacturing costs 0 0 Cost of goods manufactured $0

Answer 1

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

Applied overhead = Predetermine overhead rate*actual hours

= 21*20900

Applied overhead = 438900

Under/Over applied overhead = Applied overhead-actual overhead

= 438900-430500

Over applied overhead = 8400

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

  

Chang Company
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw material	21200
Raw material purchase	412000
Raw materials available for use	433200
Ending raw material	(31200)
Raw materials used in production	402000
Indirect material	(16200)	$385800
Direct Labour		72000
Manufacturing overhead		438900
Total manufacturing costs		896700
Beginning work in process		41200
Total cost of work in process		937900
Ending work in process		(71200)
Cost of goods manufactured		$866700