Y Company Reported the Following Actual Costs Data for the Year

question 15

Essay

Y Company reported the following actual costs data for the year:
$\begin{array} { l r } \text { Purchase of raw materials (all direct) } & \$ 200,000 \\\text { Direct labour (average hourly rate of } \$ 20 ) & 320,000 \\\text { Manufacturing overhead costs } & 100,000 \\\text { Change in inventories: } & \\\text { Increase in raw materials } & \$ 20,000 \\\text { Increase in work in process } &16,000 \\\text { Increase in finished goods }&32,000\end{array}$
Y Company used a predetermined overhead rate based on direct labour hours. Estimated annual manufacturing overhead cost and direct labour hours were $150,000 and 20,000, respectively.
Required:
a. What was the pre-determined manufacturing overhead rate?
b. Calculate the cost of goods manufactured.
c. What was the cost of goods sold before adjusting for any under or overapplied overhead?
d. By how much was manufacturing overhead cost under or overapplied?
e. 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?
f. 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:

MAN

A Metropolitan Area Network; a network that spans a physical area larger than a LAN but smaller than a WAN, used to connect users in a geographic region.

WAN

Wide Area Network, a telecommunications network that extends over a large geographic area for the primary purpose of computer networking.

MAN

Metropolitan Area Network; a network that interconnects users with computer resources in a geographic area or region larger than that covered by a large local area network (LAN) but smaller than the area covered by a wide area network (WAN).

LAN

Local Area Network, a network that connects computers within a limited area like a home, school, or office building.