Reference no: EM13519106

Baar Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows atthe beginning and end of the year:

	Beginning Balance	Ending Balance
Raw materials	$26,000	$20,000
Work in process	$71,000	$53,000
Finished goods	$66,000	$81,000

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 44,000 machine hours and incurs $176,000 in manufacturing overhead cost. The following transactions were recorded for the year:

• Raw materials were purchased, $459,000.

• Raw materials were requisitioned for use in production, $465,000 ($431,000 direct and $34,000 indirect).
• The following employee costs were incurred: direct labor, $296,000; indirect labor, $63,000; and administrative salaries, $157,000.

• Selling costs, $134,000.
• Factory utility costs, $14,000.

• Depreciation for the year was $119,000 of which $114,000 is related to factory operations and $5,000 is related to selling and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 47,000 machine-hours.

• Sales for the year totaled $1,287,000

Required:

a. Prepare a schedule of cost of goods manufactured in good form.

b. Was the overhead under- or over applied? By how much?

c. Prepare an income statement for the year in good form. The company closes any under- or over applied overhead to Cost of Goods Sold.