Question

The following cost data relate to the manufacturing activities of Jako Company during the just completed year: Manufacturing overhead costs incurred: Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,000 Property taxes, factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000 Utilities, factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,000 Depreciation, factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 960,000 Insurance, factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 Total actual manufacturing overhead costs incurred . . . . . . . . . .. . . $1,892,000 Other costs incurred: Purchases of raw materials (both direct and indirect) . . . . . . . . . . . . $1,600,000 Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $240,000 Inventories: Raw materials, beginning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80,000 Raw materials, ending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,000 Work in process, beginning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000 Work in process, ending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $280,000 The company uses a predetermined overhead rate to apply overhead cost to production. The rate for the year was $100 per machine-hour. A total of 77,600 machine-hours were recorded for the year. Required: 1. Prepare a schedule of cost of goods manufactured for the year. 2. Compute the amount of underapplied or overapplied overhead cost for the year. Close it in the Cost of Goods Sold. 3- Prepare a schedule of cost of goods sold for the year, showing the adjusted amount.

Answer 1

Schedule of Cost of goods manufactured:
Beginning balance of Work in process inventory		1,60,000
Direct material:
Beginning inventory			80,000
Add: Purchase			16,00,000
Total RM available			16,80,000
Less: Ending inventory		1,20,000
Total Material consumed		15,60,000
Less: Indirect material		60,000
Direct material consumed			15,00,000
Direct labor				2,40,000
Manufacturing Overheads (77600Mh @100)	7760000
Total Current cost of manufacturing			95,00,000
Total cost of goods manufacturing			96,60,000
Less: Ending inventory of WIP				2,80,000
Cost of goods manufactured				93,80,000
Under/Over-applied Manufacturing OH:
Manufacturing OH incurred:
Indirect material			60,000
Indirect labor			5,20,000
Property taxes			32,000
Utilities expense			2,80,000
Depreciation			9,60,000
Insurance				40,000
Total Manufacturing overheads incurred		18,92,000
Manufacturing Overheads applied		77,60,000
Over-applied Overheads			58,68,000
Schedule of Cost of goods sold:
Beginning inventory of FG		0
Add: Cost of goods manufactured	93,80,000
Total cost of goods available for sale	93,80,000
Less: Ending inventory f FG		0
Cost of goods sold-unadjusted		93,80,000
Less: Over-applied OH		58,68,000
Adjusted cost of goods sold		35,12,000