Problem 7 Madelyn Company manufactures unique, custom-made furniture. The company uses a job order system and applies overhead to production on the basis of direct labor cOst. In computing a predetermined overhead rate for the year 2019, the company estimated manufacturing overhead to be P26 million and direct labor costs to be P20 million. Actual costs incurred during 2019 Direct materials used Direct labor cost incurred Insurance - factory equipment Indirect labor Factory maintenance Rent - factory building Depreciation - factory equipment P 30,000.000 18,000,000 500,000 7,500,000 2,000,000 11,000,000 2,000,000
Problem 7 Madelyn Company manufactures unique, custom-made furniture. The company uses a job order system and applies overhead to production on the basis of direct labor cOst. In computing a predetermined overhead rate for the year 2019, the company estimated manufacturing overhead to be P26 million and direct labor costs to be P20 million. Actual costs incurred during 2019 Direct materials used Direct labor cost incurred Insurance - factory equipment Indirect labor Factory maintenance Rent - factory building Depreciation - factory equipment P 30,000.000 18,000,000 500,000 7,500,000 2,000,000 11,000,000 2,000,000
Problem 7 Madelyn Company manufactures unique, custom-made furniture. The company uses a job order system and applies overhead to production on the basis of direct labor cOst. In computing a predetermined overhead rate for the year 2019, the company estimated manufacturing overhead to be P26 million and direct labor costs to be P20 million. Actual costs incurred during 2019 Direct materials used Direct labor cost incurred Insurance - factory equipment Indirect labor Factory maintenance Rent - factory building Depreciation - factory equipment P 30,000.000 18,000,000 500,000 7,500,000 2,000,000 11,000,000 2,000,000
Problem 7 - Madelyn Company manufactures unique, custom-made furniture. The company uses a job order system and applies overhead to production on the basis of direct labor cost. In computing a predetermined overhead rate for the year 2019, the company estimated manufacturing overhead to be P26 million and direct labor costs to be P20 million
Transcribed Image Text:2. On what basis does the company allocate its manufacturing overhead?
Madelyn Company manufactures unique, custom-made furniture. The company uses
a job order system and applies overhead to production on the basis of direct labor
COst. In computing a predetermined overhead rate for the year 2019, the company
estimated manufacturing overhead to be P26 million and direct labor costs to be P20
Problem 7
million.
Actual costs incurred during 2019
Direct materials used
Direct labor cost incurred
Insurance -- factory equipment
Indirect labor
Factory maintenance
Rent - factory building
Depreciation - factory equipment
P 30,000.000
18,000,000
500,000
7,500,000
2,000,000
11,000,000
2,000,000
Cost Accounting
80
Instructions - Answer each of the following
1. Why is Madelyn Company using a job order cost system?
Compute the predetermined averhead rate for 2019.
3. Compute the amount of the under- or over applied overhead for 2019
4. Determine the cost of goods sold given the following data
January 1, 2019
P 5,000,000
13,000,000
December 31, 2019
P 4,000,000
11,000,000
Work in process
Finished goods
Problem 8
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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