The company uses a predetermined overhead rate of $20 per machine-hour to apply overhead cost to jobs. A total of 21,700 machine-hours were used during the year.

Required:

1. Compute the amount of underapplied or overapplied overhead cost for the year.

2. Prepare a schedule of cost of goods manufactured for the year.

Instructions are listed below.

Explanation:

Giving the following information:

The company uses a predetermined overhead rate of $20 per machine-hour to apply overhead cost to jobs. A total of 21,700 machine-hours were used during the year.

We were not provided with the information need to calculate the required questions, but I can provide formulas:

1) Based on the predetermined overhead rate, we allocate overhead to each job:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Now, you determine the over/under allocation:

Over/under allocation= real MOH - allocated MOH

2) The cost of goods manufactured is calculated as:

cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP