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Ravsten Company uses a job-order costing system. The company applies overhead cost to jobs on the basis of machine hours. For the current year, the

Ravsten Company uses a job-order costing system.

The company applies overhead cost to jobs on the basis of machine –hours. For the current year, the company estimated that it would work 41,000 machine-hours and incur $41,000 machine-hours and incur $184,500 in manufacturing overhead cost. The following transactions concurred during the year:

a. Raw materials requisitioned for use in production, $195,000 (70% direct and 30% indirect)

b. The following costs were incurred for employee services:

Direct labor…………………………......…$165,000

Indirect labor……………………….….......$23,000

Sales commissions……………………....$15,000

Administrative salaries…………………$30,000

c. Heat, power, and water costs incurred in the factory, $47,000

d. Insurance costs, $15,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).

e. Advertising costs incurred, $55,000.

f. Depreciation recorded for the year, $65,000 (75% relates to factory operations,

g. The company used 45,000 machine-hours during the year.

h. Goods that cost $485,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.

i. Sales for the year totaled $710,000. The total cost to manufacture these goods according to their job cost sheets was $480,000.


Required:

1. Determine the under applied or over applied overhead for the year.

2. Prepare an income statement for the year.

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Answer 1 Actual Manufacturing Costs Indirect Material 195000 X 30 5850000 Indirect Labor 2300000 Hea... blur-text-image

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