Required:

1. Compute the total manufacturing overhead (MOH) applied to jobs for the year. Is the MOH under-applied or over-applied?

2. Close the balance to cost of goods sold and prepare statement of cost of goods manufactured and income statement for the year.

Gold Nest Company uses job order costing system in which overhead is applied to jobs on the basis of direct labor cost. Estimated total direct labor cost for the year would be $200,000 and total manufacturing overhead cost would be $330,000. Inventory balance at the beginning of the year were Raw materials at $25,000, work in process at $10,000 and finished goods at $40,000. During the year, the following transactions were completed:

Raw materials purchased for cash, $275,000

Raw materials requisitioned for use in production, $280,000. Materials charged directly to jobs, $220,000, the remaining materials were indirect.

Cost of employee services were direct labor, $180,000; indirect labor, $72,000; sales commissions, $63,000, and administrative salaries, $90,000.

Rent for the year was $18,000 of which $13,000 is related to factory operations and the rest to selling and administrative activities.

Factory utility costs incurred, $57,000. Advertising costs, $140,000.

Depreciation recorded on equipment, $100,000, out of which $88,000 was for factory equipment and the remaining was on equipment used in selling and administrative activities.

Based on the job order cost sheets, goods manufactured and completed during the year cost $675,000

Sales for the year, $1,250,000. Cost to manufacture these goods according to their job cost sheets was $700,000.

Manufacturing overhead applied per unit

$ / $

= $

MOH applied for the year

$ x $

= $

Actual Manufacturing overhead:

Indirect Materials

$

Indirect Labor

Rent Expense - Factory

Utility Expense - Factory

Depreciation - Factory equipment

Total

$

Over-applied MOH

$

Gold Nest Company

Statement of Cost of Goods Manufactured

For the Year Ended December 31, 20xx

Raw Materials used

$

Direct Labor

Manufacturing Overhead applied

Total Manufacturing costs

$

Add: Work in Process, Jan. 1

Total cost of goods in process

$

Less: Work in Process, Dec. 31

Cost of Goods Manufactured

$

Gold Nest Company Income Statement For the Year Ended December 31, 20xx

Sales

$

Less cost of goods sold ($ - $ )........

Gross margin..............................................................

$

Less selling and administrative expenses:

Advertising expense................................................ $

Administrative salaries...............................................

Sales commissions......................................................

Rent expense..............................................................

Depreciation expense.................................................

Net operating income.................................................

$