Question 1Far West Manufacturing Company operates a job-order costing system and appliesoverhead cost to jobs on the basis of direct material cost. Its predetermined overhead ratewas based on a cost formula that estimated $500,000 of manufacturing overhead for anestimated allocation base of $390,625 direct material dollars. The company has providedthe following data in the form of an Excel worksheet:Ending$55,000166,125138,000The following actual costs were incurred during the year:$450,000$119,000Beginning$38,00079,00047,000Raw MaterialsWork in ProcessFinished GoodsPurchase of raw materialsDirect labor costManufacturing overhead costs:Indirect materials104,875102,00035,00032,70041,00023,42549,000Insurance, factoryDepreciation of equipmentIndirect laborProperty taxesMaintenanceRent, buildingRequired:Compute the predetermined overhead rate for the year.Prepare a schedule of cost of goods manufactured for the year.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 oroverapplied overhead to cost of goods sold.5. Prepare all journal entries related to manufacturing overhead. Besides indirectmaterials, indirect labor and depreciation, all other costs are recorded as accountspayable.66étv

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Answered: Required: Compute the predetermined…

Required: Compute the predetermined overhead rate for the year. Prepare a schedule of cost of goods manufactured for the year. Compute the amount of underapplied or overapplied overhead for the year.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

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2. Austin Electronics manufactures two large-screen television models: the Royale, which sells for $1,600, and a new model, the Majestic, which sells for $1,300. Few per unit cost data are given: Traditional Costing DM Royale $850 Majestic $570 DL ($20 per hour) MOH ($38 per DLH) $140 $248 $100 $190 In 2017, Austin manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $38 per direct labor hour was determined by dividing total expected manufacturing overhead of $7,600,000 by the total direct labor hours (200,000) for the two models. Management is considering phasing out the Royale model (comparatively low profit) and increasing the production of the Majestic model Before finalizing its decision, management asks Austin's controller to prepare an analysis using activity-based costing (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2017. Est. Overhead Activity | Level 40,000 18,000…
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