P4-17 Applying Overhead; Under applied or Over
applied Overhead; Income Statement (LO 4-2, LO 4-4, LO 4-5)
P4-17 Durnham Company uses a job-order costing
system. The following transactions took place last year:
a. Raw materials requisitioned for use in production,
$40,000 (80% direct and 20% indirect).
b. Factory utility costs incurred, $14,600.
c. Depreciation recorded on plant and equipment,
$28,000. Three-fourths of the depreciation relates to factory equipment, and
the remsinder relates to selling and administrative equipment.
d. Costs for salaries and wages incurred as
follows:
Direct labor……………. $ 40,000
Indirect labor……….. 18,000
Sales commissions… 10,000
Administrative salaries 25,000
e. Insurance costs incurred, $3,000 (80% relates to
factory operations, and 20% relates to selling and administrative activities).
f. Miscellaneous selling and administrative
expenses incurred, $18,000.
g. Manufacturing overhead was applied to
production. The company applies overhead on the basis of 150% of direct labor
cost.
h. Goods that cost $130,000 to manufacture
according to their job cost sheets were transferred to the finished goods
warehouse.
i. Goods that had cost $120,000 to manufacture
according to their job cost sheets were sold for $200,000.
REQUIRED:
1. Determine the underapplied or overapplied
overhead for the year.
2. Prepare an income statement for the year. (HINT:
No calculkations are required to determine the cost of goods sold before any
adjustment for underapplied or overapplied overhead).
TUTORIAL
PREVIEW
1 Determine the underapplied or overapplied overhead
for the year.
|
Manufacturing
overhead applied
|
($40,000 ×
150%)
|
$
60,000
|
|||
|
Actual
overheads:
|
|||||
|
Indirect
material (40,000 x 20%)
|
8,000
|
||||
|
Factory
utilities cost
|
14,600
|
||||
File name: P4-17 Durnham Company.xls File type: .xls PRICE: $10
