Question

The following costs are attributed to the Quilt Company:

Purchase of raw materials (all direct) $297,100

Direct labour cost

Manufacturing overhead costs

Inventories:

Beginning raw materials

Ending raw materials Beginning work in process

Ending work in process

Beginning finished goods

Ending finished goods

S141,800

$175,260

S10,000

$5,000

S20,000

S10,800

S20,000 $4,800

Quilt Company used a 120% predetermined overhead rate based on direct labour cost.

Required:

7. Calculate the cost of goods manufactured.

& What was the cost of goods sold before adjusting for any under or over applied overhead? 9. By how much was manufacturing overhead cost under or

over applied?

10. Would the summary journal entry to close any under or over applied manufacturing overhead cost be a debit or credit to COGS?

Answer 1

Answer :-

7)

Predetermined overhead rate = 120% of direct labour cost

Manufacturing overhead applied to work in process = Direct labour cost x 120%

= 141,800 x 120%

= $170,160

Schedule of Cost of goods manufactured
Beginning raw material inventory	10,000
Add: Purchases of raw material	297,100
Total raw materials available	307,100
Less: Ending raw materials inventory	- 5,000
Raw materials used in production	302,100
Direct labor	141,800
Manufacturing overhead applied to work in process	170,160
Total manufacturing cost	614,060
Add: Beginning work in process inventory	20,000
Less: Ending work in process inventory	- 10,800
Cost of goods manufactured	623,260

Cost of goods manufactured = $623,260

8) Schedule of cost of goods sold

Statement of cost of goods sold
Cost of goods manufactured	$623,260
Add: Opening finished goods	$20,000
Good availabke for sale	$643,260
Less : Closing finished goods	$4,800
Cost of goods sold	$638,460

9)

Actual Overhead = $175,260

Applied Overhead = $141800 x 120% = $170,160

Under applied overhead = $175260 - $170,160 = $5,100.

10)

No.	Account Title & Explanation	Debit	Credit
1	Cost of goods sold	$5,100
	Manufacturing Overhead		$5,100
	(To Record of under applied overhead)