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Chang Company: Applying overhead, journal entries, and T-accounts

The following cost data relate to the manufacturing activities of Chang Company during the completed year:

Manufacturing overhead costs incurred:
Indirect materials $ 15,000
Indirect labor 130,000
Property taxes, factory 8,000
Utilities, factory 70,000
Depreciation, factory 240,000
Insurance, factory 10,000

Total actual manufacturing overhead costs incurred $473,000

Other costs incurred:
Purchases of raw materials (both direct and indirect) $400,000
Direct labor cost $60,000

Raw materials, beginning $20,000
Raw materials, ending $30,000
Work in process, beginning $40,000
Work in process, ending $70,000

The company uses a predetermined overhead rate to apply overhead-cost to production. The rate for the year was $25 per machine-hour. A total of $19,400 machine-hours was recorded for the year.

1. Compute the amount of under applied or over applied overhead costs for the year.
2. Prepare a schedule of cost of goods manufactured for the year.

Solution Summary

The expert applies overhead, journal entries and t-accounts for Chang Company.