Question 3: Cost Flows in Job Order Costing

The following cost data relate to the manufacturing activities of the Kanaba Corporation last year:

Manufacturing overhead costs:

Property taxes

$1,500

Utilities, factory

2,500

Indirect labor

5,000

Depreciation, factory

12,000

Insurance, factory

3,000

Total

$24,000

Other costs incurred:

Purchases of direct materials

$16,000

Direct labor cost

$20,000

Inventories:

Direct materials, January 1

$4,000

Direct materials, December 31

$3,500

Work in process, January 1

$3,000

Work in process, December 31

$3,750

The company uses a predetermined overhead rate to apply manufacturing overhead cost to production. The rate last year was $5.00 per machine-hour; a total of 5,000 machine-hours were recorded for the year.

Required:

a. Calculate the amount of applied overhead (1 mark)

b. Compute the amount and specify underapplied or overapplied overhead cost for the year. (2 marks)

c. Prepare a schedule of Cost of Goods Manufactured for the year. Show all items. (12 marks)