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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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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.

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 ...

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