The following cost data relate to the manufacturing activities of Chang Company during the just completed year Manufacturing overhead costs incurred Indirect materials Indirect labor Property taxes, factory Utilities, factory Depreciation, factory Insurance, factory Total actual manufacturing overhead costs incurred $ 15,000 130,000 8,000 70,000 240,000 10,000 $473,000 Other costs incurred Purchases of raw materials (both direct and indirect) Direct labor cost $400,000 $60,000 Inventories: Raw materials, beginning. Raw materials, ending Work in process, beginning Work in process, ending $20,000 $30,000 $40,000 $70,000 The company uses a predetermined overhead rate of $25 per machine-hour to apply overhead cost to jobs. A total of 19,400 machine-hours were used during the year. Required: 1. Compute the amount of underapplied or overapplied overhead cost for the year 2. Prepare a schedule of cost of goods manufactured for the year

Answer and Explanation:

The computation of the amount of underapplied or overapplied overhead cost is shown below:-

Overapplied overhead cost = Actual Manufacturing overhead costs - Manufacturing overhead applied

= $473,000 - (19,400 × $25)

= $473,000 - $485,000

= $12,000

2. The Preparation of cost of goods manufactured for the year is shown below:-

Chang Company

Cost of goods manufactured

Direct materials:  

Raw materials inventory, beginning      $20,000  

Add: Purchases of raw materials           $400,000

Raw materials available for use              $420,000

Less: Raw materials inventory, ending   $30,000  

Raw materials used in production           $390,000

Less: Indirect materials                             $15,000     $375,000

Direct labor                                                                   $60,000

Manufacturing overhead cost

applied to work in process                                          $485,000

Total manufacturing costs                                           $920,000

Add: Work in process inventory, beginning               $40,000

Less: Work in process inventory, ending                    $70,000

Cost of goods manufactured                                        $890,000

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