Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and...
Savallas
Company is highly automated and uses computers to control manufacturing
operations. The company uses a job-order costing system and applies
manufacturing overhead cost to products on the basis of computer-hours.
The following estimates were used in preparing the predetermined
overhead rate at the beginning of the year:
|
| Computer-hours | 85,000 | |
| Fixed manufacturing overhead cost | $ | 1,275,000 |
| Variable manufacturing overhead per computer-hour | $ | 3.00 |
During
the year, a severe economic recession resulted in cutting back
production and a buildup of inventory in the company’s warehouse. The
company’s cost records revealed the following actual cost and operating
data for the year:
|
| Computer-hours | 60,000 | |
| Manufacturing overhead cost | $ | 1,350,000 |
| Inventories at year-end: | ||
| Raw materials | $ | 400,000 |
| Work in process | $ | 160,000 |
| Finished goods | $ | 1,040,000 |
| Cost of goods sold | $ | 2,800,000 |
| Required: |
| 1. |
Compute the company’s predetermined overhead rate for the year.
|
| Predetermined overhead rate | $ per hour | |
| 2. |
Compute the underapplied or overapplied overhead for the year. (Input the amount as a positive value.)
|
| (Click to select)UnderappliedOverapplied overhead cost | $ |
| 3.1 |
Assume
the company closes any underapplied or overapplied overhead directly to
Cost of Goods Sold. Prepare the appropriate journal entry.
|
| General Journal | Debit | Credit |
| (Click to select)Cost of goods soldManufacturing overheadRaw materialsSalaries expenseAccounts payableWork in processDepreciation expenseFinished goods | ||
| (Click to select)Depreciation expenseWork in processAccounts payableCost of goods soldManufacturing overheadFinished goodsSalaries expenseRaw materials |
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