Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year

Machine-hours		89,000
Fixed manufacturing overhead cost	$	1,276,000
Variable manufacturing overhead per computer-hour	$	3.30

During the year, a glut of furniture on the market resulted in cutting back production and a buildup of furniture in the companys warehouse. The companys cost records revealed the following actual cost and operating data for the year:

Machine-hours		60,000
Manufacturing overhead cost	$	1,143,000
Inventories at year-end:
Raw materials	$	420,000
Work in process (includes overhead applied of 63,504)	$	190,000
Finished goods (includes overhead applied of 275,184)	$	1,020,000
Cost of goods sold (includes overhead applied of 719,712)	$	2,780,000

1.	Compute the companys predetermined overhead rate for the year. (Round your answer to 2 decimal places.)

Predetermined overhead rate _________ per hour

2.	Compute the underapplied or overapplied overhead for the year. (Round your intermediate calculations to 2 decimal places.)

_______________, _____________

3.

Assume the company closes any underapplied or overapplied overhead directly to Cost of Goods Sold. Prepare the appropriate entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)

4

Assume that the company allocates any underapplied or overapplied overhead to Work in Process, Finished Goods, and Cost of Goods Sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year. These amounts are $63,504 for work in process, $275,184 for finished goods, and $719,712 for cost of goods sold. Prepare the journal entry to show the allocation for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)

5.	How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated rather than closed directly to Cost of Goods Sold? (Round your intermediate calculations to 2 decimal places.)

Net operating income will be ____________ __________ if the ______________

Overhead is allocated rather than closed directly to cost of goods sold.

______________________________________________________________________________________________________________________________

Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the companys transactions with customers, employees, and suppliers are conducted in cash; there is no credit.

The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $92,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:

Raw materials	$	10,200
Work in process	$	4,900
Finished goods	$	8,800

During the year, the following transactions were completed:

a.	Raw materials purchased for cash, $166,000.
b.	Raw materials requisitioned for use in production, $147,000 (materials costing $121,000 were charged directly to jobs; the remaining materials were indirect).
c.	Costs for employee services were incurred as follows:

Direct labor	$	168,000
Indirect labor	$	305,100
Sales commissions	$	22,000
Administrative salaries	$	49,000

d.	Rent for the year was $18,400 ($13,700 of this amount related to factory operations, and the remainder related to selling and administrative activities).
e.	Utility costs incurred in the factory, $13,000.
f.	Advertising costs incurred, $11,000.
g.	Depreciation recorded on equipment, $24,000. ($15,000 of this amount was on equipment used in factory operations; the remaining $9,000 was on equipment used in selling and administrative activities.)
h.	Manufacturing overhead cost was applied to jobs, $?
i.	Goods that had cost $228,000 to manufacture according to their job cost sheets were completed.
j.	Sales for the year totaled $511,000. The total cost to manufacture these goods according to their job cost sheets was $217,000.

1.	Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)

- Raw materials purchased for cash, $166,000.

- Raw materials requisitioned for use in production, $147,000 (materials costing $121,000 were chargeable directly to jobs; the remaining materials were indirect).

- Record the entry for employee services cost incurred.

- Rent for the year was $18,400 ($13,700 of this amount related to factory operations, and the remainder related to selling and administrative activities).

- Utility costs incurred in the factory, $13,000.

- Advertising costs incurred and paid $11,000.

- Depreciation recorded on equipment, $24,000. ($15,000 of this amount was on equipment used in factory operations; the remaining $9,000 was on equipment used in selling and administrative activities.)

- Record the Manufacturing overhead cost that was applied to jobs.

- Goods that had cost $228,000 to manufacture according to their job cost sheets were completed.

- Sales for the year totaled $511,000.

- The total cost to manufacture these goods according to their job cost sheets was $217,000.

(all the answers show look like this table)

2. Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these t-accounts (dont forget to enter the beginning balances in your inventory accounts). (Round your intermediate calculations to 2 decimal places.)

3-a.	Is Manufacturing Overhead underapplied or overapplied for the year?

Overapplied ?

Underapplied ?

3-b.	Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to 2 decimal places.)

Record the entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4.	Prepare an income statement for the year. (Round your intermediate calculations to 2 decimal places.)