PROBLEM 1.

1,412,00
Raw Materials........................................................ 0
Accounts Payable......................................... 1,412,000

1,299,50
Work in Process..................................................... 0
Manufacturing Overhead....................................... 98,000
Raw Materials............................................... 1,397,500

Work in Process..................................................... 316,000

Manufacturing Overhead....................................... 163,200
479,200

1,580,00
Work in Process..................................................... 0
1,580,000
($20,000,000/100,000) × 7,900

1,160,80
Manufacturing Overhead....................................... 0
Accumulated Depreciation, Building........... 190,500
Accumulated Depreciation, Equipment........ 890,700
Utilities Payable (or Cash)............................ 79,600

2,494,20
Finished Goods...................................................... 0
2,494,200

2,380,00
Cost of Goods Sold................................................ 0
Finished Goods............................................. 2,380,000

3,570,00
Accounts Receivable.............................................. 0
Sales.............................................................. 3,570,000
PROBLEM 2.

a. Schedule of cost of goods manufactured

Estimated total manufacturing overhead (a)................... $176,000

Estimated total machine-hours (b).................................. 44,000
Predetermined overhead rate (a) ÷ (b)............................. $ 4.00

Actual total machine-hours (a)........................................ 47,000

Predetermined overhead rate (b)..................................... $4.00
Overhead applied (a) × (b).............................................. $188,000

Direct materials:
Raw materials inventory, beginning............................ $ 26,000
Add: purchases of raw materials..................................  459,000
Total raw materials available....................................... 485,000
Deduct: raw materials inventory, ending.....................    20,000
Raw materials used in production................................... 465,000
Less: indirect materials....................................................    34,000
Direct materials............................................................... 431,000
Direct labor...................................................................... 296,000
Manufacturing overhead applied.....................................  188,000
Total manufacturing costs............................................... 915,000
Add: Beginning work in process inventory.....................    71,000
986,000
Deduct: Ending work in process inventory.....................    53,000
Cost of goods manufactured............................................ $933,000

b
. Overhead under- or overapplied
Actual manufacturing overhead cost incurred:
Indirect materials.......................................................... $ 34,000
Indirect labor................................................................ 63,000
Factory utilities............................................................. 14,000
Factory depreciation.....................................................  114,000
Manufacturing overhead cost incurred............................ 225,000
Manufacturing overhead applied.....................................  188,000
Underapplied overhead................................................... $ 37,000
 c. Income Statement

Beginning finished goods inventory............................... $ 66,000

Cost of goods manufactured............................................  933,000
Goods available for sale.................................................. 999,000
Ending finished goods inventory.....................................    81,000
Unadjusted cost of goods sold......................................... 918,000
Add: underapplied overhead...........................................     37,000
Adjusted cost of goods sold............................................ $955,000

Sales............................................................................... $1,287,000
Cost of goods sold (adjusted).........................................      955,000
Gross margin.................................................................. 332,000
Less selling and administrative expenses:
Administrative salaries.................................................... $157,000
Selling costs..................................................................... 134,000
Depreciation....................................................................       5,000      296,000
Net operating income..................................................... $     36,000

PROBLEM 3
(a) = $100,000; $1,000,000/$10
(b) = $101,000; $1,010,000/$10
(c) = $82,500 underapplied; $1,092,500 - $1,010,000
(d) = $8 per MH; $1,600,000/200,000
(e) = $1,520,000; 190,000 × $8
(f) = ($47,500) overapplied; $1,472,500 - $1,520,000

PROBLEM 4.

a. Cost of raw materials used in production........................................ $1,250

Less decrease in the raw materials inventory during the year
($130 - $80 = $50).......................................................................       50
Cost of raw materials purchased during the year............................ $1,200

b
. Total manufacturing costs............................................................... $6,050
Less: Direct materials used in production....................................... 1,250
Less: Manufacturing overhead applied...........................................  2,800
Direct labor cost incurred................................................................ $2,000

Predetermined overhead rate = Manufacturing overhead cost ÷ Direct labor

cost = $2,800 ÷ $2,000 =140% of direct labor cost

c. Total manufacturing costs............................................................... $6,050

Add: Work in process inventory, January 1....................................     250
6,300
 Deduct: Work in process inventory, December 31.........................     400
Cost of goods manufactured............................................................ $5,900

d
. Finished goods inventory, January 1............................................... $  300
Add: Cost of goods manufactured...................................................  5,900
Cost of goods available for sale....................................................... 6,200
Deduct: Finished goods inventory, December 31...........................     200
Cost of goods sold........................................................................... $6,000

PROBLEM 5

a. Actual total manufacturing overhead cost....................... $24,000 

Manufacturing overhead applied: 5,000 × $5.00 =.........   25,000 
Overapplied manufacturing overhead............................. $ (1,000)

b. Kanaba Company
Statement of Cost of Goods Manufactured
For the year ended December 31

Direct materials:
Direct materials inventory, January 1.......................... $  4,000
Add purchases of direct materials................................   16,000
Direct materials available for use................................. 20,000
Deduct direct materials inventory, December 31.........     3,500
Direct materials used in production................................ 16,500
Direct labor...................................................................... 20,000
Overhead cost applied to work in progress.....................   25,000
Total manufacturing costs............................................... 61,500
Add work in process, January 1......................................     3,000
64,500
Deduct work in process, December 31............................     3,750
Cost of goods manufactured............................................ $60,750

PROBLEM 6

If overhead is overapplied, too much overhead has been applied to inventories and they
are therefore overcosted. Since these excess costs flow through to Cost of Goods Sold
when finished goods are sold, it is necessary to reduce Cost of Goods Sold in order to
eliminate this overstatement of costs.