Exercise 126, to 129

Ex.  126

Edwards Company applies manufacturing overhead to jobs on the basis of machine hours used.  Overhead costs are expected to total $900,000 for the year, and machine usage is estimated at 200,000 hours.

In January, $93,000 of overhead costs are incurred and 22,000 machine hours are used. For the remainder of the year, $974,000 of additional overhead costs are incurred and 214,000 additional machine hours are worked.

Instructions

(a)    Compute the manufacturing overhead rate for the year.

(b)    What is the amount of over- or underapplied overhead at January 31? How should this amount be reported in the financial statements prepared on January 31?

(c)    What is the amount of over- or underapplied overhead at December 31?

Ex.  127

Klinger Company estimates that annual manufacturing overhead costs will be $1,800,000 for 2002. The actual overhead costs at the end of 2002 are $1,790,000. Activity base information for 2002 follows:

                       Activity Base                      Estimated                       Actual   

                       Direct Labor Cost               $2,000,000                  $2,100,000

                       Direct Labor Hours                  180,000                       190,000

                       Machine Hours                        200,000                       192,000

Ex.  127  (cont.)

Instructions

(a)   Compute the predetermined overhead rate for each activity base.

(b)   Compute the amount of overhead applied in 2002 for each activity base.

(c)   Compute the amount of under- or overapplied overhead for 2002 for each activity base.

Ex.  128

Urick Manufacturing Company makes specialty tools. In January, Urick incurs manufacturing costs of $12,000,000 for direct materials, direct labor, and overhead. 25% of the total costs represents overhead applied. The overhead rate is $1 for every $2 of direct labor costs incurred. Inventory balances were:

                                                                           January 1            January 31

           Raw materials                                         $400,000               $600,000

           Work in process                                        600,000                 800,000

           Finished goods                                          400,000                 500,000

At the end of January, there was $1,000 of overapplied overhead.

Instructions

(a)     Determine the cost of raw materials purchased in January.

(b)     Prepare a cost of goods manufactured schedule for January 2002.

(c)     Compute the cost of goods sold for January.

Ex.  129

The following information is available for Hanson Company at December 31, 2002:

1.   Inventory balance                            Beginning of Year            End of Year

               Finished Goods                               $14,000                       $10,000

               Work in Process                                 6,000                           8,000

               Raw Materials                                   10,300                           6,500

2.   Debit postings to Work in Process Inventory during the year were:

               Direct materials                                                                 $  70,000

               Direct labor                                                                           50,000

               Manufacturing overhead applied                                        100,000

3.   Sales totaled $350,000 for the year.

Instructions

(a)     Prepare a condensed cost of goods manufactured schedule.

(b)     Prepare an income statement for the year through gross profit.