Bieler & Cie of Altdorf, Switzerland, makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The currency in Switzerland is the Swiss franc, which is denoted by Sfr. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:
Machine-hours ....................................................... 75,000
Manufacturing overhead cost ............................... Sfr900,000
During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company recorded the following actual cost and operating data for the year:
Machine-hours .............................................................................................................. 60,000
Manufacturing overhead cost ................................................................................ Sfr850,000
Cost of goods sold (not adjusted for underapplied or overapplied overhead) ....Sfr1,400,000
Required:
1. Compute the company's predetermined overhead rate.
2. Compute the underapplied or overapplied overhead.
3. Determine the cost of goods sold for the year after any adjustment for underapplied or overapplied overhead.