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ABC Co. is a manufacturer. It uses job-order costing. At the beginning and end of the year, its inventory balances were as follows: Raw materials
ABC Co. is a manufacturer. It uses job-order costing. At the beginning and end of the year, its inventory balances were as follows: Raw materials Beginning Balance Ending Balance $ 14,450 $ 22,450 Work in process Finished Goods $ 27,450 $ 9,450 $ 62,450 $ 77,450 A predetermined overhead rate is calculated based on machine-hours and then applied to jobs. At the beginning of the year, the company estimated that it would work 33,450 machine-hours and incur $264,255 in manufacturing overhead cost. ABC Co. recorded the following transactions for the year: Raw materials purchased: $315,450. Raw materials equisitioned for use in production: $307,450 ($280,550 direct and $26,900 indirect). Employee costs incurred: direct labor, $377,450; indirect labor, $96,450; and administrative salaries, $172,450. Selling costs: $147,450. Factory utility costs: $10,450. Depreciation for the year: $154,000, of which $138,000 is related to factory operations and $16,000 is related to selling, general, and administrative activities. The actual level of activity for the year was 34,090 machine-hours. Manufacturing overhead was applied to jobs throughout the year. Total sales for the year: $1,271,000. Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead underapplied or overapplied? By how much? c. Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold
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