Far West Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct material cost. Its predetermined overhead rate was based on a cost formula that estimated $500,000 of manufacturing overhead for an estimated allocation base of $390,625 direct material dollars. The company has provided the following data in the form of an Excel worksheet: Beginning $38,000 79,000 47,000 Ending $55,000 166,125 Raw Materials Work in Process Finished Goods 138,000 The following actual costs were incurred during the year: $450,000 $119,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect materials 104,875 Insurance, factory Depreciation of equipment Indirect labor Property taxes Maintenance Rent, building 102,000 35,000 32,700 41,000 23,425 49,000 Required: 1. Compute the predetermined overhead rate for the year. 2. Prepare a schedule of cost of goods manufactured for the year. 3. Compute the amount of underapplied or overapplied overhead for the year. 4. Prepare a schedule of cost of goods sold for the year. Adjust the underapplied or overapplied overhead to cost of goods sold. 5. Prepare all journal entries related to manufacturing overhead. Besides indirect materials, indirect labor and depreciation, all other costs are recorded as accounts payable.
Far West Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct material cost. Its predetermined overhead rate was based on a cost formula that estimated $500,000 of manufacturing overhead for an estimated allocation base of $390,625 direct material dollars. The company has provided the following data in the form of an Excel worksheet: Beginning $38,000 79,000 47,000 Ending $55,000 166,125 Raw Materials Work in Process Finished Goods 138,000 The following actual costs were incurred during the year: $450,000 $119,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect materials 104,875 Insurance, factory Depreciation of equipment Indirect labor Property taxes Maintenance Rent, building 102,000 35,000 32,700 41,000 23,425 49,000 Required: 1. Compute the predetermined overhead rate for the year. 2. Prepare a schedule of cost of goods manufactured for the year. 3. Compute the amount of underapplied or overapplied overhead for the year. 4. Prepare a schedule of cost of goods sold for the year. Adjust the underapplied or overapplied overhead to cost of goods sold. 5. Prepare all journal entries related to manufacturing overhead. Besides indirect materials, indirect labor and depreciation, all other costs are recorded as accounts payable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Far West Manufacturing Company operates a job-order costing system and applies
overhead cost to jobs on the basis of direct material cost. Its predetermined overhead rate
was based on a cost formula that estimated $500,000 of manufacturing overhead for an
estimated allocation base of $390,625 direct material dollars. The company has provided
the following data in the form of an Excel worksheet:
Ending
$55,000
Beginning
$38,000
79,000
47,000
Raw Materials
Work in Process
166,125
138,000
Finished Goods
The following actual costs were incurred during the year:
$450,000
$119,000
Purchase of raw materials
Direct labor cost
Manufacturing overhead costs:
Indirect materials
104,875
Insurance, factory
Depreciation of equipment
Indirect labor
102,000
35,000
32,700
41,000
Property taxes
Maintenance
Rent, building
23,425
49,000
Required:
1. Compute the predetermined overhead rate for the year.
2. Prepare a schedule of cost of goods manufactured for the year.
3. Compute the amount of underapplied or overapplied overhead for the year.
4. Prepare a schedule of cost of goods sold for the year. Adjust the underapplied or
overapplied overhead to cost of goods sold.
5. Prepare all journal entries related to manufacturing overhead. Besides indirect
materials, indirect labor and depreciation, all other costs are recorded as accounts
payable.
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