The Custom Guitar Company Uses a Predetermined Overhead Rate of $5

question 38

Essay

The Custom Guitar Company uses a predetermined overhead rate of $5 per machine hour to apply overhead. During the year, 32,500 machine hours were worked. Actual manufacturing overhead cost for the year was $187,500. Company records showed the following account balances at the end of the year:
$$\begin{array} { l r } \text { Materials } & \$ 22,500 \\\text { Work in process } & 37,500 \\\text { Finished goods } & 50,000 \\\text { Cost of goods sold } & 112,500\end{array}$$
Required:
a.Determine the amount of underapplied or overapplied overhead.
b.Assuming the amount of underapplied or overapplied overhead is material, determine underapplied or overapplied overhead that would be allocated to the following accounts if the allocation is made using ending account balances:
Work in Process
Finished Goods
Cost of Goods Sold
c.Assuming the amount of underapplied or overapplied overhead is material, calculate the new balance of the following accounts after underapplied or overapplied overhead has been allocated:
Work in Process
Finished Goods
Cost of Goods Sold
d.Determine the balance of Cost of Goods Sold if underapplied or overapplied overhead is immaterial.

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Definitions:

Capitalist Social Systems

Economic systems characterized by private or corporate ownership of capital goods, by investments determined by private decision, and by prices, production, and the distribution of goods determined mainly by competition in a free market.

Official Statistics

Official statistics are quantifiable data collected and published by governmental agencies or other recognized official entities, often used for policy making and public information.

Suicide Rates

The frequency of suicides occurring within a particular population, usually per year, often measured per 100,000 individuals.

Suicide By

A method where an individual puts themselves in harm's way with the intention of ending their life, often abbreviated in contexts like "suicide by police" where the individual provokes law enforcement to use lethal force.