1. Determine the company’s predetermined overhead application rate.

 2,730,000 / 2,100,000 = 130% of direct labor cost

2. Determine the additions to the Work-in-Process Inventory account for direct material used, direct
labor, and manufacturing overhead.

 Direct material 2,800,000

 Direct labor 2,175,000
 Applied overhead (2,175,000 x 0.130) 2,827,500
 Total 7,802,500

3. Compute the amount BBBC would disclose as finished-goods inventory on the December 31, 20x4,
balance sheet.

 Direct material 78,000

 Direct labor 42,500
 Overhead applied (42,500X130%) 55,250
 Total cost of finished goods ending inventory 175,750

4. Prepare the journal entry needed to record the year’s completed production.

 Cost of goods manufactured = 78,400 + 7,802,500 = 7,880,900

JOURNAL ENTRY DEBIT CREDIT

Finished Goods Inventory $7,880,900

Work in Process $7,880,900

5. Compute the amount of under- or over applied overhead at year-end, and prepare the necessary
journal entry to record its disposition.

 Indirect material used $32,500

 Indirect labor $1,430,000
 Factory depreciation $870,000
 Factory insurance $29,500
 Factory utilities $415,000

Add to get the total of actual overhead.

Total actual overhead = $2,777,000

Overhead applied = 2,175,000 x 0.130 = 2,827,500
Since the applied is higher than actual, overhead is over applied by 2,827,500 - 2,777,000 = $50,500.

JOURNAL ENTRY DEBIT CREDIT

Manufacturing Overhead $50,500

Cost of Goods Sold $50,500

6. Determine BBBC’s 20x4 cost of goods sold.

 0 + 7,880,900 - 175,750 – 50,500

 $7,654,650

7. Would it be appropriate to include selling and administrative expenses in either manufacturing

overhead or cost of goods sold? Briefly explain.

No kasi hindi counted as product costs ang selling and administrative expenses.. period costs sila.