Blasi Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year:?Beginning inventories:???Finished goods$33,000??Estimated total manufacturing overhead at the beginning of the year$540,000??Estimated direct labor-hours at the beginning of the year40,000direct labor-hoursResults of operations:?Raw materials (all direct) requisitioned for use in production$462,000??Direct labor cost$567,000??Actual direct labor-hours39,000direct labor-hours?Manufacturing overhead:???Indirect labor cost$121,000??Other manufacturing overhead costs incurred$451,000??Selling and
administrative:???Selling and administrative salaries$263,000??Other selling and administrative expenses$299,000??Cost of goods manufactured$1,371,000??Sales revenue$3,298,000??Cost of goods sold (unadjusted)$1,302,000?Required:a. What is the total manufacturing cost added to Work in Process during the year?b. What is the cost of goods available for sale during the year?c. What is the net operating income for the year?
What will be an ideal response?
a. The total manufacturing cost added to work in process is computed as follows:
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base
= $540,000 ÷ 40,000 direct labor-hours = $13.50 per direct labor-hour
Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
= $13.50 per direct labor-hour × 39,000 direct labor-hours = $526,500
| ? | Direct materials | $462,000 |
| ? | Direct labor | 567,000 |
| ? | Manufacturing overhead applied | 526,500 |
| ? | Total manufacturing cost | $1,555,500 |
b. The cost of goods available for sale is computed as follows:
| ? | Beginning finished goods inventory | $33,000 |
| ? | Add: Cost of goods manufactured | 1,371,000 |
| ? | Cost of goods available for sale | $1,404,000 |
c. The net operating income is computed as follows:
| ? | Actual manufacturing overhead incurred ($121,000 + $451,000) | $572,000 |
| ? | Manufacturing overhead applied to Work in Process | 526,500 |
| ? | Underapplied (overapplied) manufacturing overhead | $45,500 |
| ? | Unadjusted cost of goods sold | $1,302,000 |
| ? | Underapplied (overapplied) overhead | 45,500 |
| ? | Adjusted cost of goods sold | $1,347,500 |
| ? | Sales | ? | $3,298,000 |
| ? | Cost of goods sold (adjusted) | ? | 1,347,500 |
| ? | Gross margin | ? | 1,950,500 |
| ? | Selling and administrative expenses: | ? | ? |
| ? | Selling and administrative salaries | 263,000 | ? |
| ? | Other selling and administrative expenses | 299,000 | 562,000 |
| ? | Net operating income | ? | $1,388,500 |
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