X Company Reported the Following Actual Cost Data for the Year

question 52

Essay

X Company reported the following actual cost data for the year:
$\begin{array} { l r } \text { Purchase of raw materials (all direct) } & \$ 266,000 \\\text { Direct labour cost } & 160,000 \\\text { Manufacturing overhead costs } & 246,000 \\\text { Change in inventories: } & \\\text { Decrease in raw materials } & \$ 10,000 \\\text { Decrease in work in process } & 8,000 \\\text { Decrease in finished goods } & 16,000\end{array}$
Company used a 150% predetermined overhead rate based on direct labour cost. The rate was based on annual estimated overhead cost and direct labour cost of $252,000 and $168,000, respectively.
Required:
a. Calculate the cost of goods manufactured.
b. What was the cost of goods sold before adjusting for any under or overapplied overhead?
c. By how much was manufacturing overhead cost under or overapplied?
d. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an entry appropriate in this situation? Why or why not?
e. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.

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Definitions:

Hawthorne Effect

The effect of the research process itself on the groups or individuals being studied; hence, the act of studying them often itself changes them.

Originated

Refers to the point or place where something begins or is created.

Participant Observation

A qualitative research method involving the systematic recording of behaviors and interactions while being directly involved in the subject's environment.

Content Analysis

The analysis of meanings in cultural artifacts such as books, songs, and other forms of cultural communication.