The company applies overhead cost to jobs on the basis of machine-hours. For the

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The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 33,000 machine-hours and incur $169,950 in manufacturing overhead cost. The following transactions occurred during the year a. Raw materials requisitioned for use in production, $307,000 (75% direct and 25% indirect) b. The following costs were incurred for employee services: Direct labor Indirect labor Sales commissions Administrative salaries S 178,000 S 36,000 $ 28,000 S 43,000 c. Heat, power, and water costs incurred in the factory, $66,000. d, insurance costs, $28,000 (85% relates to factory operations, and 15% relates to selling and administrative activities). e. Advertising costs incurred, $68,000. f. Depreciation recorded for the year, $78,000 (80% relates to factory operation g. The company used 58,000 machine-hours during the year s, and 20% relates to selling and administrative activities). Goods that cost $498,000 to manufacture according to their job cost sheets were transferred to the finis i. Sales for the year totaled $736,000. The total cost to manufacture these goods according to their job cost sheets was $493,000. Required: e the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.) 2. Prepare an income statement for the year. (Hint: No calculations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead.) rate to 2 decimal places.) (Round predetermined overhead Ravsten Company Income Statement For the Year Ended December

Explanation / Answer

1) Actual manufacturing overhead indirect materials (307,000*25%) 76750 indirect labor 36,000 hear,power and water costs 66,000 insurance costs (28,000*85%) 23800 depreciation (78000*80%) 62400 total actual manufacturing overhead 264950 predetermined overhead rate = 169,950/33000 5.15 overhead applied (5.15*58000)= 298700 overhead over applied (298700-264950)= 33750 2) income statement sales 736,000 cost of goods sold (493,000-33,750) 459250 Gross profit 276,750 selling and administrative expense 158,800 net income 117,950 Selling and administrative expense Sales commission 28,000 administrative salaries 43,000 insurance costs (28000*15%) 4200 advertising costs 68,000 depreciation (78000*20%) 15600 total selling and adm expense 158,800

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