CASE. NO 6 BBA 4th Semester Under/Over Applied FOH Cost Cost Accounting ABC Furniture has made certain experience based on its past performance. The first experience of company is that 1 labor hour is sufficient to produce 1 table and for that 1 hour carpenter gets Rs. 20 as labor cost .Company is of the view that FOH costs are closely linked with direct labor as if carpenter gets Rs.20, company incurs Rs. 10 (50\% of direct labor cost). But actual FOH costs are calculated /Known at the end of the year. Sale price per unit, variable cost per unit and other costs per unit are remaining unchanged in various years. Selling, admin and general expenses are variable @ Rs.2 per unit sold. Also it is pointed out that company is earning a profit of Rs. 8 per unit sold. What happened in year 2003 that company (have no opening inventories) as a first lot produced tables on 30-3-2003 and the same are sold to a client by drawing the following bill on him: Material(Wood) = Rs. 500 as is actually paid for purchase of wood used in such tables Labor(Carpenter) = Rs. 1000 as is paid actually to carpenter for such tables Overhead(Applied) = Rs. 500 as on the bases of past experience it is added@50\% of labor cost Selling,Admin \& Gen Exp = Rs. 100 as estimated@Rs.2 per unit Profit = Rs. 400 as is experienced in past Total bill = Rs. 2500 Company also produced another 50 tables till 31-12-2003 and recorded the costs as under: Material ( Wood) = Rs. 500 as is actually paid for purchase of wood used in such tables Labor ( Carpenter) = Rs. 1000 as is paid actually to carpenter for such tables Overhead (Applied) = Rs. 500 as on the bases of past experience. It is added @50% of labor cost This lot is kept to be sold in next year. On 31-12-2003, it is reported that actual FOH cost of company for this year remained Rs. 1100 Required: Make Income Statement for year 2003 assuming: (A) All Under/Over applied FOH is charged to Cost of Goods Sold of this Year (B) Any sort of Under/Over applied FOH shall be charged/distributed to entire production of this year