Question

Y Company reported the following actual cost data for the year:

Purchase of raw materials (all direct)	$200,000
Direct labour (average hourly rate of $20)	320,000
Manufacturing overhead costs (actual)	100,000
Inventories:
Ending raw materials (all direct)	$95,000
Beginning raw materials (all direct)	75,000
Ending work in process	21,000
Beginning work in process	5,000
Ending finished goods	57,000
Beginning finished goods	25,000

Y Company used a predetermined overhead rate based on direct labour hours. Estimated annual manufacturing overhead cost and direct labour hours were $150,000 and 20,000, respectively.

Required:

a. What was the pre-determined manufacturing overhead rate?
b. Calculate the cost of goods manufactured.
c. What was the cost of goods sold before adjusting for any under or overapplied overhead? d. By how much was manufacturing overhead cost under or overapplied?
e. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost.

Answer 1

a	Estimated manufatcuring overhead cost	150000
	Direct labor hours	20000
	Predetermined manufacturing overhead rate	=estimated manufacturing overhead cost/direct labor hours
		=150000/20000
		7.5
b	Materials
	Beginnings inventory	75000
	Purchases	200000
	Ending inventory	95000
	Issued to manufacturing	180000
	Direct labor costs	320000
	Rate per hour	20
	Direct labor hours	=320000/20
		16000
	Work-in-progress
	Beginnings inventory	5000
	During the month
	Direct materials	180000
	Direct labor	320000
	Manufatcuring overhead	120000
	Ending inventory	21000
	Cost of goods manufactured	604000
c	Finished goods
	Beginning inventory	25000
	Cost of goods manufactured	604000
	Ending inventory	57000
	Cost of goods sold	572000
d	Applied manufacturing overhead	120000
	Actual manufacturing overhead	100000
	Overapplied	20000
e	Summary journal entry
		Dr	Cr
	Manufacturing overhead	20000
	To cost of goods sold		20000