Reference no: EM131933167

Problem

Operating data for the Abraham Company for fiscal 2017 are presented below. Abraham has one building, and the space in the building is divided about equally between manufacturing and retailing. Approximately 20% of the labor costs incurred in manufacturing are for supervisory labor, and the remaining 80% of the salaries are paid to employees directly engaged in manufacturing jobs for clients.

Purchases of raw material in 2017	$220,000
Manufacturing labor cost incurred	$500,000
Salaries of sales force	$112,000
Operating expenses for the building	$90,000
Vacation pay and employee benefits for factory workers	$74,000
Retail selling and administrative expenses	$282,000
Depreciation expense for delivery trucks	$25,000
Safety training for production workers	$16,000
Depreciation of factory equipment	$110,000
Raw materials inventory, 12/31/16	$42,000
Raw materials inventory, 12/31/17	$36,000
Work in progress inventory, 12/31/16	$18,000
Work in progress inventory, 12/31/17	$20,000
Finished goods inventory, 12/31/16	$44,000
Finished goods inventory, 12/31/17	$50,000
Applied manufacturing overhead in 2017	$300,000
Sales revenue	$1,600,000

1.) Overhead is applied using direct labor hours. The budget overhead for 2017 was $320,000 and the budget for direct labor hours for 2017 was 16,000 hours. How many direct labor hours were worked during 2017?

2.) Assume that the actual cost of overhead is $280,000, the applied manufacturing overhead in 2017 is $300,000 (as originally stated in the problem), and the cost of goods sold before considering the amount of overapplied or underapplied overhead is $900,000. Compute the cost of goods sold for 2017 after adjusting for the overapplied/underapplied overhead (do not prorate). Show your work and/or explain your answer in order to receive full credit.