Reference no: EM132884590

Question - Shoe Co. provided the following information: Estimated variable manufacturing overhead $ 88,000 Estimated fixed manufacturing overhead $ 62,000 Estimated direct materials $ 55,000 Actual variable manufacturing overhead $ 90,000 Actual fixed manufacturing overhead $ 70,000

Cost driver activity levels:

Estimated Actual

Direct labour hours 10,000 10,500

Direct labour costs $50,000 $55,200

Direct material costs $60,000

Machine hours 20,000 18,730

Production setups 5,000 4,760

Required -

a) Calculate the predetermined manufacturing overhead rate assuming direct labour hours (DLH) is the cost driver.

b) Assume Job 100 uses 838 DLH. Calculate the overhead applied using DLH as the cost driver.

c) Based on your answer in a):

i. Calculate the amount of underapplied or overapplied overhead.

ii. Prepare the journal entry to allocate the amount of overapplied or underapplied overhead directly to cost of goods sold.

d) Assume that the balance in work in process is $100,000, cost of goods sold is $300,000, and finished goods inventory is $400,000 before underapplied or overapplied overhead is allocated. Management has decided to prorate the amount of underapplied or overapplied overhead using unadjusted ending balances. Using your answer in a), calculate the balance in cost of goods sold after allocation.

e) Calculate the predetermined manufacturing overhead rate assuming machine hours is the cost driver.

f) Based on your answer in e), calculate the balance in work in process before work in process is allocated to finished goods. Assume the opening work in process balance is nil.