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Sandar Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours 90,000 Fixed manufacturing overhead cost $1,278,000 Variable manufacturing overhead per computer-hour $5.30 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year ended 31 December 2019: Computer-hours 85,000 Purchase of raw materials $7,890,000 Direct labor cost $1,722,000 Manufacturing overhead costs: Insurance, factory .. $ 88,000 Depreciation of equipment 170,000 Indirect material.. 12,000 Indirect labor. . 327,000 Property taxes 85,000 Maintenance... 630,000 Rent, building 360,000 Beginning Ending Raw Materials $1,770,000 $ 900,000 Work in Process 960,000 870,000 Finished Goods 1,110,000 1,860,000 Required: a. Compute the company's predetermined overhead rate for the year. b. Compute the underapplied or overapplied overhead for the year. c. Prepare a schedule of cost of goods manufactured. d. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Prepare a schedule of cost of goods sold. e. Prepare an income statement for the year ended 31 December 2019. Additional information of the Company is given below: Sales. . Selling expenses. Administrative expense. $18,100,000 $1,070,000 720,000

Sandar Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours 90,000 Fixed manufacturing overhead cost $1,278,000 Variable manufacturing overhead per computer-hour $5.30 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year ended 31 December 2019: Computer-hours 85,000 Purchase of raw materials $7,890,000 Direct labor cost $1,722,000 Manufacturing overhead costs: Insurance, factory .. $ 88,000 Depreciation of equipment 170,000 Indirect material.. 12,000 Indirect labor. . 327,000 Property taxes 85,000 Maintenance... 630,000 Rent, building 360,000 Beginning Ending Raw Materials $1,770,000 $ 900,000 Work in Process 960,000 870,000 Finished Goods 1,110,000 1,860,000 Required: a. Compute the company's predetermined overhead rate for the year. b. Compute the underapplied or overapplied overhead for the year. c. Prepare a schedule of cost of goods manufactured. d. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Prepare a schedule of cost of goods sold. e. Prepare an income statement for the year ended 31 December 2019. Additional information of the Company is given below: Sales. . Selling expenses. Administrative expense. $18,100,000 $1,070,000 720,000

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter5: Product And Service Costing: Job-order System
Section: Chapter Questions
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Sandar Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours 90,000 Fixed manufacturing overhead cost $1,278,000 Variable manufacturing overhead per computer-hour $5.30 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year ended 31 December 2019: Computer-hours 85,000 Purchase of raw materials $7,890,000 Direct labor cost $1,722,000 Manufacturing overhead costs: Insurance, factory .. $ 88,000 Depreciation of equipment 170,000 Indirect material.. 12,000 Indirect labor. . 327,000 Property taxes 85,000 Maintenance... 630,000 Rent, building 360,000 Beginning Ending Raw Materials $1,770,000 $ 900,000 Work in Process 960,000 870,000 Finished Goods 1,110,000 1,860,000
Transcribed Image Text:Sandar Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours 90,000 Fixed manufacturing overhead cost $1,278,000 Variable manufacturing overhead per computer-hour $5.30 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year ended 31 December 2019: Computer-hours 85,000 Purchase of raw materials $7,890,000 Direct labor cost $1,722,000 Manufacturing overhead costs: Insurance, factory .. $ 88,000 Depreciation of equipment 170,000 Indirect material.. 12,000 Indirect labor. . 327,000 Property taxes 85,000 Maintenance... 630,000 Rent, building 360,000 Beginning Ending Raw Materials $1,770,000 $ 900,000 Work in Process 960,000 870,000 Finished Goods 1,110,000 1,860,000
Required: a. Compute the company's predetermined overhead rate for the year. b. Compute the underapplied or overapplied overhead for the year. c. Prepare a schedule of cost of goods manufactured. d. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Prepare a schedule of cost of goods sold. e. Prepare an income statement for the year ended 31 December 2019. Additional information of the Company is given below: Sales. . Selling expenses. Administrative expense. $18,100,000 $1,070,000 720,000
Transcribed Image Text:Required: a. Compute the company's predetermined overhead rate for the year. b. Compute the underapplied or overapplied overhead for the year. c. Prepare a schedule of cost of goods manufactured. d. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Prepare a schedule of cost of goods sold. e. Prepare an income statement for the year ended 31 December 2019. Additional information of the Company is given below: Sales. . Selling expenses. Administrative expense. $18,100,000 $1,070,000 720,000
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