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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.
    Sales
    $860
    Purchase of raw materials
    $150
    Direct labor
    $110
    Manufacturing overhead
    $210
    Administrative expenses
    $130
    Selling expenses
    $180
    Raw materials inventory, beginning
    $40
    Raw materials inventory, ending
    $80
    Work-in-process inventory, beginning
    $20
    Work-in-process inventory, ending
    $80
    Finished goods inventory, beginning
    $80
    Finished goods inventory, ending
    $150

    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
    $80,000
    Indirect materials
    $40,000
    Indirect labor
    $100,000
    Maintenance
    $80,000
    Depreciation
    $100,000
    Payroll taxes
    $80,000
    Others
    $80,000
    Total
    $560,000

    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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    Attachments

    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.

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