Managerial Accounting
PROBLEM 2-21B Predetermined Overhead Rate; Disposition of Underapplied or Overapplied Overhead (LO1, LO7)
CHECK FIGURE
(2) Underapplied: $68,600
Adriana Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:
Computer-hours
82,000
Fixed manufacturing overhead cost
$1,278,000
Variable manufacturing overhead per computer-hour
$3.40
During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year:
Computer-hours
60,000
Manufacturing overhead cost
$1,208,000
Inventories at year-end: Raw materials
$420,000
Work in process
$120,000
Finished goods
$1,030,000
Cost of goods sold
$2,770,000
Required:
1. Compute the company’s predetermined overhead rate for the year.
2. Compute the underapplied or overapplied overhead for the year.
3. Assume the company closes any underapplied or overapplied overhead directly to cost of goods sold. Prepare the appropriate entry. Will this entry increase or decrease net operating income?
PROBLEM 2-22B Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement (LO6)
CHECK FIGURE
Direct labor: $57,000
Alexsandar Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials):
Selling expenses
$217,000
Purchases of raw materials
$263,000
Direct labor ?
Administrative expenses
$151,000
Manufacturing overhead applied to work in process
$336,000
Total actual manufacturing overhead costs
$359,000
Inventory balances at the beginning and end of the year
CHECK FIGURE
(2) Underapplied: $68,600
Adriana Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:
Computer-hours
82,000
Fixed manufacturing overhead cost
$1,278,000
Variable manufacturing overhead per computer-hour
$3.40
During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year:
Computer-hours
60,000
Manufacturing overhead cost
$1,208,000
Inventories at year-end: Raw materials
$420,000
Work in process
$120,000
Finished goods
$1,030,000
Cost of goods sold
$2,770,000
Required:
1. Compute the company’s predetermined overhead rate for the year.
2. Compute the underapplied or overapplied overhead for the year.
3. Assume the company closes any underapplied or overapplied overhead directly to cost of goods sold. Prepare the appropriate entry. Will this entry increase or decrease net operating income?
PROBLEM 2-22B Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement (LO6)
CHECK FIGURE
Direct labor: $57,000
Alexsandar Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials):
Selling expenses
$217,000
Purchases of raw materials
$263,000
Direct labor ?
Administrative expenses
$151,000
Manufacturing overhead applied to work in process
$336,000
Total actual manufacturing overhead costs
$359,000
Inventory balances at the beginning and end of the year