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Arbo Corporation, which uses a job-costing system, had two jobs in process at the start of February 2020: Job no. B4 with a cost of

Arbo Corporation, which uses a job-costing system, had two jobs in process at the start of February 2020: Job no. B4 with a cost of $110,000 and job no. C1 with a cost of $12,000. The following information is available:

  • The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $3,276,000 and 104,000 hours, respectively.

  • The company worked on four jobs during February. Direct materials used, direct labor incurred, and machine hours consumed were:

Job No. Direct Material Direct Labor Machine Hours
B4 148,000 130,000 1,500
C1 155,000 99,000 1,100
C2 220,000 140,000 2,500
C3 70,000 85,000 1,400

  • Manufacturing overhead during February included charges for depreciation ($47,000), indirect labor ($78,000), indirect materials used ($38,000), and other factory costs ($41,000).

  • Arbo completed job no. B4 and job no. C1. Job no. B4 was sold for cash, producing a gross profit of $142,600 for the firm.

Required:

  1. Compute the company's predetermined overhead application rate. State it in terms of cost per machine hour.

Predetermined overhead rate per machine hour:

  1. Compute Total Manufacturing costs (use applied overhead - not actual overhead).

Total manufacturing costs:

  1. Compute the (unadjusted) Cost of Goods Sold.

Cost of goods sold:

  1. Compute the Cost of Goods Manufactured (use applied overhead - not actual overhead).

Cost of goods manufactured:

  1. Compute the cost of Ending Work-in-Process Inventory (use applied overhead - not actual overhead).

Cost of Ending Work-In-Process Inventory:

  1. Compute (and identify) the amount of over- or under-applied overhead.

Over- or under-applied overhead (and which one):

Show computations here:

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