Managerial Accounting
The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. In computing an overhead rate for the year, the company’s estimates were: manufacturing overhead cost, $126,000; and direct labor cost, $84,000. The company has provided the following data in the form of an Excel worksheet:
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.:.
Required:
1. a. Compute the predetermined overhead rate for the year.
b. Compute the amount of underapplied or overapplied overhead for the year.
2. Prepare a schedule of cost of goods manufactured for the year.
3. Compute the cost of goods sold for the year. (Do not include any underapplied or overapplied overhead in your cost of goods sold figure.) What options are available for disposing of underapplied or overapplied overhead?
4. Job 137 was started and completed during the year. What price would have been charged to the customer if the job required $3,200 in materials and $4,200 in direct labor cost, and the company priced its jobs at 40% above the job’s cost according to the accounting system?
5. Direct labor made up $8,000 of the $40,000 ending Work in Process inventory balance. Supply the information missing below: Direct materials . . . . . . . . . . . . . . . $ ? Direct labor . . . . . . . . . . . . . . . . . . . 8,000 Manufacturing overhead . . . . . . . . . ? Work in process inventory . . . . . . . $40,000
SOLUTION:
1. a.
[pic]
|b. |Actual manufacturing overhead costs: | |
| |Insurance, factory |$ 7,000 |
| |Depreciation of equipment |18,000 |
| |Indirect labor |42,000
[pic]
.:.
Required:
1. a. Compute the predetermined overhead rate for the year.
b. Compute the amount of underapplied or overapplied overhead for the year.
2. Prepare a schedule of cost of goods manufactured for the year.
3. Compute the cost of goods sold for the year. (Do not include any underapplied or overapplied overhead in your cost of goods sold figure.) What options are available for disposing of underapplied or overapplied overhead?
4. Job 137 was started and completed during the year. What price would have been charged to the customer if the job required $3,200 in materials and $4,200 in direct labor cost, and the company priced its jobs at 40% above the job’s cost according to the accounting system?
5. Direct labor made up $8,000 of the $40,000 ending Work in Process inventory balance. Supply the information missing below: Direct materials . . . . . . . . . . . . . . . $ ? Direct labor . . . . . . . . . . . . . . . . . . . 8,000 Manufacturing overhead . . . . . . . . . ? Work in process inventory . . . . . . . $40,000
SOLUTION:
1. a.
[pic]
|b. |Actual manufacturing overhead costs: | |
| |Insurance, factory |$ 7,000 |
| |Depreciation of equipment |18,000 |
| |Indirect labor |42,000