Question:

Ravsten Company uses a job-order costing system. On January 1, the beginning of the current year, the company's inventory balances were as follows:

Raw materials $23,000

Work in process $12,800

Finished goods $31,400

The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 37,400 machine-hours and incur $157,080 in manufacturing overhead cost. The following transactions were recorded for the year:

a. Raw materials were purchased on account: $228,000.

b. Raw materials were requisitioned for use in production: $204,000 (85% direct and 15% indirect).

c. The following costs were incurred for employee services:

Direct labour $171,200

Indirect labour $29,800

Sales commissions $40,200

Administrative salaries $85,600

d. Heat, power, and water costs were incurred in the factory: $48,300.

e. Prepaid insurance expired during the year: $17,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).

f. Advertising costs were incurred, $57,000.

g. Depreciation was recorded for the year: $68,400 (75% relates to factory operations, and 25% relates to selling and administrative activities).

h. Manufacturing overhead cost was applied to production. The company recorded 42,800 machine-hours for the year.

i. Goods that cost $521,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.

j. Sales for the year totalled $765,100 and were all on account. The total cost to manufacture these goods according to their job cost sheets was 513,200

\fb. 1/3,400 521,000 1. J. | 513,200 C. V 171,200 End. Bal. 513,200 h . V 179,760 End. Bal. 16, 160 Finished Goods Beg. Bal. 31,400 521,000 513,200 j. End. Bal. 39,200 3-a. Is manufacturing overhead underapplied or overapplied for the year? Underapplied overhead to search O EI 9 wReturn to quest 3-b. Prepare a journal entry to properly dispose of any balance in the Manufacturing Overhead account. (Do not round intermediate calculations and round your final answers to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) x Answer is complete but not entirely correct. No Event General Journal Debit Credit A Manufacturing overhead 6, 160.00 Cost of goods sold 5,560.00 x Finished goods V 425.00 X Work in process 175.00 X to search O wCheck my work mode : This shows what is correct or incorrect for the work you have completed so x Answer is not complete. RAVSTEN COMPANY Income Statement For the Year Ended December 31 Sales $ 765, 100 Cost of goods sold 518,760 X Gross profit 246,340 Selling and administrative expenses: Sales commissions 40,200 Administrative salaries 85,600 Insurance expense 3,400 Advertising expenses 57,000 186,200 Operating income V $ 60,140 here to search O W