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

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    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.

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    Solution Summary

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