Molin Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Estimated total manufacturing overhead at the beginning of the year Estimated direct labor-hours at the beginning of the year S638,750 35,000 direct labor-hours Results of operations: 40,000 direct labor-hours Actual direct labor-hours Manufacturing overhead: Indirect labor cost Other manufacturing overhead costs incurred $166,000 $595,000 $1,570,000 Cost of goods sold (unadjusted)
Required
a. What is the total amount of manufacturing overhead applied to production during the year?
b. Is manufacturing overhead overapplied or underapplied for the year? By how much?
c. What is the adjusted cost of goods sold for the year?

A. 730,000

B. 31,000

C. 1,601,000

Explanation:

We can calculate the total amount of manufacturing overhead applied during the year by first calculating the predetermined overhead rate

DATA

Estimated Total Manufacturing overhead at the beginning of the year =                   638,750

Estimated direct Labour hours at the beginning of the year = 35,000

Predetermined Overhead Rate = 638,750 /35,000

Predetermined Overhead Rate   18.25

Actual Direct Labour Hours  =  40,000

Requirement A

Total Manufacturing Overhead applied = Predetermined Overhead Rate x Actual Direct Labour Hours

Total Manufacturing Overhead applied = 18.25  x 40,000

Total Manufacturing Overhead applied  = 730,000

Requirement B

Actual Manufacturing Overhead (166000 + 595000)     = 761,000

Over/Under applied = Actual Manufacturing Overhead - Total Manufacturing Overhead applied

Over/Under applied = 761,000 -  730,000

Manufacturing Overhead is underapplied =  31,000

Requirement C

Cost of Goods sold (adjusted) = Manufacturing Overhead is underapplied + Cost of Goods sold (unadjusted)

Cost of Goods sold (adjusted) = 31,000  + 1,570,000

Cost of Goods sold (adjusted) = 1,601,000

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