Under-applied overhead is $105,200. Prorate the amount calculated in under-applied overhead based on the ending balances (before prorating) of work in process, finished goods, and cost of goods sold.
Accounting 220 Take Home Assignment #2
In a normal job-order cost system, manufacturing overhead is applied to production using a predetermined rate. This overhead rate is set at the beginning of each fiscal year by forecasting the year's overhead and relating it to direct labor costs. The budget for 2016 was as follows:
Direct labor: $1,800,000
Manufacturing overhead: $900,000
As at the end of the year, two jobs were incomplete. These were 1768B, with total direct labor charges of $110,000, and 1819C, with total direct labor charges of $390,000. On these jobs, machine hours were 287 hours for 1768B and 647 hours for 1819C. Direct materials issued for 1768B amounted to $220,000, and for 1819C they amounted to $420,000. Total charges to the Manufacturing Overhead Control account for the year were $897,000, and direct labor charges made to all jobs amounted to $1,583,600, representing 247,216 direct labor hours. There were no beginning inventories. In addition to the ending work in process just described, the ending finished goods inventory account showed a balance of $720,000. Sales for the year amounted to $6,201,355; cost of goods sold totaled $3,935,000; and sales, general, and administrative expenses were $1,857,870. The above amounts for inventories and the cost of goods sold have not been adjusted.
The cost of goods sold.