Question

The following costs are attributed to the Quilt Company: Purchase of raw materials (all direct)    $291,100 Direct labour cost    $141,800 Manufacturing overhead costs    $198,100 Inventories:    Beginning raw materials     $10,000 Ending raw materials    $900 Beginning work in process    $20,000 Ending work in process    $15,900 Beginning finished goods    $20,000 Ending finished goods    $6,800 Quilt Company used a 120% predetermined overhead rate based on direct labour cost. Required: 7.   Calculate the cost of goods manufactured. 8.   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

Ans. 7	Quilt Company
	Schedule of Cost of Goods Manufactured
	Particulars	Amount	Amount
	Direct materials:
	Beginning raw materials inventory	$10,000
	Add: Purchase of raw materials	$291,100
	Raw materials available	$301,100
	Less: Ending raw materials inventory	-$900
	Raw materials used in production		$300,200
	Direct labor		$141,800
	Manufacturing overhead applied		$170,160
	Total manufacturing costs		$612,160
	Add: Beginning Work in process inventory		$20,000
	Less: Ending Work in process inventory		-$15,900
	Cost of goods manufactured		$616,260
	*Calculations for manufacturing overhead applied :
	Overhead applied   = Direct labor cost * Predetermined overhead rate
	$141,800 * 120%
	$170,160
Ans. 8	Quilt Company
	Schedule of Cost of Goods Sold
	Particulars	Amount
	Cost of Goods Manufactured	$616,260
	Add: Beginning finished goods inventory	$20,000
	Cost of goods available for sale	$636,260
	Less: Ending finished goods inventory	-$6,800
	Unadjusted Cost of goods sold	$629,460
Ans. 9	If the applied overhead is less than the Actual overhead
	it means that the overhead is under applied.
	Under applied overhead = Actual manufacturing overhead cost incurred - Overhead applied
	$198,100 - $170,160
	$27,940
Ans. 10	Journal entry to record the under applied overhead:
	Particulars	Debit	Credit
	Cost of goods sold	$27,940
	Manufacturing overhead		$27,940
	(To record the allocation of under applied overhead)