Management finds the variation in unit costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead, since it is the largest element of cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. After some analysis, you have determined that the companys overhead costs are mostly fixed and therefore show little sensitivity to changes in the level of production.

Required:

What would be the predetermined manufacturing overhead rate for the year on the basis of total units to be produced?

Recompute the company's unit costs in accordance with your recommendations in part (1).

Canada Capital Company uses a job-order costing system. The following data relate to October, the first month of the companys fiscal year:

Raw materials were purchased on account, $234,000.

Raw materials were issued to production, $211,600 ($198,400 direct materials and $13,200 indirect materials).

Direct labour cost was incurred, $111,200; indirect labour cost was incurred, $100,800.

Depreciation was recorded on factory equipment, $41,200.

Other manufacturing overhead costs were incurred during October, $78,400 (credit accounts payable).

The company applies manufacturing overhead cost to production on the basis of $8.00 per machine-hour. There were 33,600 machine-hours recorded for October.

Production orders costing $580,000 according to their job cost sheets were completed during October and transferred to finished goods.

Production orders that had cost $534,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold at 25% above cost. The goods were sold on account.

Required:

1. Prepare journal entries to record the preceding information.

The following cost data relate to the manufacturing activities of Crystal Corporation during the past year:

Manufacturing overhead costs incurred:
Indirect materials	$	37,000
Indirect labour		18,500
Property taxes, factory		25,900
Utilities, factory		148,000
Depreciation, factory		259,000
Insurance, factory		14,800
Total actual costs incurred	$	503,200
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	309,000
Direct labour cost		61,800
Inventories:
Raw materials, beginning	$	33,000
Raw materials, ending		46,000
Work in process, beginning		56,000
Work in process, ending		89,000

The company uses a predetermined overhead rate to apply overhead cost to production. The rate for the year was $26 per machine-hour. A total of 20,000 machine-hours were recorded for the year.

Required:

1. Compute the amount of under- or overapplied overhead cost for the year.

2. Prepare a schedule of cost of goods manufactured for the year.