Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and appliesmanufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formulathat estimates $765,000 of total manufacturing overhead for an estimated activity level of 85,000 machine-hours.During the year, a large quantity of furniture on the market caused Luzadis to cut production and build inventories. The companyprovided the following data for the year:Machine-hoursManufacturing overhead costInventories at year-end:Raw materialsWork in process (includes overhead applied of $62,100)Finished goods (includes overhead applied of $105,570)Cost of goods sold (includes overhead applied of $453,330)Required:1. Compute the underapplied or overapplied overhead.69,000$ 719,000$ 14,000$ 183,000$ 311,100$ 1,335,9002. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry.3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Costof Goods Sold. Prepare the appropriate journal entry.4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work inProcess, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?Complete this question by entering your answers in the tabs below.Required 1 Required 2 Required 3 Required 4Compute the underapplied or overapplied overhead.< Required 1Required 2 >

Manufacturing overhead: It is the indirect cost incurred as a part of manufacturing the products.…

Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? Complete this question by entering your answers in the tabs below.

Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? Complete this question by entering your answers in the tabs below.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies
manufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formula
that estimates $765,000 of total manufacturing overhead for an estimated activity level of 85,000 machine-hours.
During the year, a large quantity of furniture on the market caused Luzadis to cut production and build inventories. The company
provided the following data for the year:
Machine-hours
Manufacturing overhead cost
Inventories at year-end:
Raw materials
Work in process (includes overhead applied of $62,100)
Finished goods (includes overhead applied of $105,570)
Cost of goods sold (includes overhead applied of $453,330)
Required:
1. Compute the underapplied or overapplied overhead.
69,000
$ 719,000
$ 14,000
$ 183,000
$ 311,100
$ 1,335,900
2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry.
3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost
of Goods Sold. Prepare the appropriate journal entry.
4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in
Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3 Required 4
Compute the underapplied or overapplied overhead.
< Required 1
Required 2 >

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