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    Cost of Goods Manufactured and Sold, Income Statement and Overhead Applied

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    Problem I

    The following data (in thousands of dollars) have been taken from the accounting records of ACME Corporation for the completed year.
    Purchase of raw materials
    Direct labor
    Manufacturing overhead
    Administrative expenses
    Selling expenses
    Raw materials inventory, beginning
    Raw materials inventory, ending
    Work-in-process inventory, beginning
    Work-in-process inventory, ending
    Finished goods inventory, beginning
    Finished goods inventory, ending

    On the basis of the data, complete the following:

    Prepare a schedule of cost of goods manufactured in good form.
    Compute the cost of goods sold in all details.
    Prepare the income statement.

    Problem II

    Morrison and Company uses a predetermined overhead rate. Overhead for the next twelve months is estimated to be $400,000. The company applies overhead as a percentage of direct labor cost, which is estimated to be $500,000 for the next year. During the year, actual direct labor cost amounted to $520,000 and the actual overhead was as outlined below:
    Factory rent
    Indirect materials
    Indirect labor
    Payroll taxes

    On the basis of the data, complete the following:

    Calculate the overapplied or underapplied overhead for the year.

    Support your responses with examples.

    Please find a word attachement for better reading.

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    Solution Preview

    Please see the attached Excel 97-2003 workbook. (Problem I and Problem II are on separate tabs.) Note: Though the problem did not state a year, because schedules in good form have a year I assumed it was calendar year 2013.

    On the basis of the data, complete the following:

    Prepare a schedule of cost of goods manufactured in good form.

    Acme Corporation
    Schedule of Cost of Goods Manufactured
    For the Year Ended December 31, 2013
    (in $000)

    Raw materials used in ...

    Solution Summary

    This solution illustrates how to prepare a cost of goods manufactured scheduled, how to compute cost of goods sold for a manufacturer, how to prepare an income statement for a manufacturer, how to compute an overhead application rate, how to apply the rate and how to compute the under- or over-applied overhead.