Question
Crimson Tide Company uses a job-order costing system. At Crimson Tide, overhead costs are applied to jobs on the basis of machine-hours. For the current
Crimson Tide Company uses a job-order costing system. At Crimson Tide, overhead costs are applied to jobs on the basis of machine-hours. For the current year, Crimson Tide estimated that its machines would work for a total of 34,000 machine-hours. Tide also estimated for the current year that it would incur $176,800 in manufacturing overhead cost. The following transactions occurred during the year: a. Raw materials requisitioned for use in production, $308,000 (80% direct and 20% indirect). b. The following costs were incurred for employee services: Direct labor $ 179,000 Indirect labor $ 37,000 Sales commissions $ 29,000 Administrative salaries $ 44,000 c. Total insurance costs were $29,000 Note: Of the total insurance cost, 90% relates to factory operations, and 10% relates to selling and administrative activities. d. In the factory only, heat, power, and water costs incurred in the factory totalled $75,000. e. Total depreciation recorded for the year was $79,000 Note: Of the total depreciation recorded 85% relates to factory operations, and 15% relates to selling and administrative activities. f. Advertising costs incurred was $69,000. g. According to their job cost sheets, goods that cost $499,000 to manufacture were transferred to the finished goods warehouse. h. Sales for the year totaled $738,000. The total cost to manufacture these goods according to their job cost sheets was $494,000. i. The company actually used 59,000 machine-hours during the year. 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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