MANAGERIAL ACCOUNTING

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applying_overhead.docx
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Durham Company uses a job-order costing system. During the year, the following transactions took place: 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 remainder relates to selling and administrative equipment. d. Costs for salaries and wages were incurred as follows: Direct labor . . . . . . . . . . . . . . . . $40,000 Indirect labor . . . . . . . . . . . . . . . $18,000 Sales commissions . . . . . . . . . . $10,000 Administrative salaries . . . . . . . $25,000 e. Prepaid insurance expired during the year, $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 on account for $200,000. Required: 1. Determine underapplied or overapplied for the year?

2. Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured)