Question
6. 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
6.
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 37,000 machine-hours and incur $159,100 in manufacturing overhead cost. The following transactions occurred during the year:
a. Raw materials requisitioned for use in production, $191,000 (75% direct and 25% indirect).
b. The following costs were incurred for employee services:
Direct labor | $ | 161,000 | |
Indirect labor | $ | 19,000 | |
Sales commissions | $ | 11,000 | |
Administrative salaries | $ | 26,000 | |
|
c. Heat, power, and water costs incurred in the factory, $35,000.
d. Insurance costs, $11,000 (85% relates to factory operations, and 15% relates to selling and administrative activities).
e. Advertising costs incurred, $51,000.
f. Depreciation recorded for the year, $61,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
g. The company used 41,000 machine-hours during the year.
h. Goods that cost $481,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Sales for the year totaled $702,000. The total cost to manufacture these goods according to their job cost sheets was $476,000.
Required:
1. Determine the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.).
2. Prepare an income statement for the year. (Hint: No calculations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead.) (Round predetermined overhead rate to 2 decimal places.)
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