Practice Chapter 3

Kody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: |

   |   |   |

  Machine-hours required to support estimated production |   | 155,000   |

  Fixed manufacturing overhead cost | $ | 654,000   |

  Variable manufacturing overhead cost per machine-hour | $ | 4.40   |

|

Required: |

1. | Compute the predetermined overhead rate. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) |

  Predetermined overhead rate | $  per MH   |

2. | During the year Job 500 was started and completed. The following information was available with respect to this job: |

   |   |   |

  Direct materials requisitioned | $ | 330   |

  Direct labor cost | $ | 220   |

  Machine-hours used |   | 35   |

|

  | Compute the total manufacturing cost assigned to Job 500. (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) |

  Total manufacturing cost | $   |

3-a. | During the year the company worked a total of 145,600 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,262,072. What is the amount of underapplied or overapplied overhead for the year? (Input the amount as a positive value. Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) |

  Manufacturing overhead cost underapplied by | $   |

3-b. | If this amount were closed out entirely to cost of goods sold, would the journal entry increase or decrease net operating income? |

  |   |

  | Decrease |

Explanation:

1.

The estimated total manufacturing overhead cost is computed as follows: |

   |   |   |

  Estimated fixed manufacturing overhead | $ | 654,000   |

  Estimated variable manufacturing overhead

     $4.40 per MH × 155,000 MHs |   | 682,000  ...