Financial

Question 2

Nishat Akmal Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor hours. For 2019, company estimated $300,000 of total manufacturing overhead for an estimated 10,000 direct labor hours. The actual labor hours used during the period were 11,250 hours. The company has provided the following cost data:

Inventories:

Jan 1 31 December

Raw materials 40,000 27,000

Work in process 35,000 10,000

Other information:

Total actual manufacturing overhead costs

114,000

Purchases of raw material (all direct)

185,000

Direct labor cost

145,000

Required:

a. Compute the pre-determined overhead application rate for 2019. (3 marks)

b. Compute the total amount of MOH applied to all jobs during 2019. (2 marks)

c. Compute the amount of over applied or underapplied MOH amount. (2 marks)

d. Prepare a schedule of cost of goods manufactured.