A Review of the Records of Okanagan Products Disclosed the Following

question 62

Essay

A review of the records of Okanagan Products disclosed the following year-end information:
▪ Work-in-Process Inventory account: Contained charges for overhead of $975,000.
▪ Cost-of-Goods-Sold account: Contained a year-end debit balance of $4,680,000. This amount was computed prior to any year-end adjustment for under- or overapplied overhead.
▪ Manufacturing Overhead account: Contained debits of $972,000, which included 30,000 of sales commissions.
▪ Okanagan applies manufacturing overhead to production by using a predetermined rate of $30 per machine hour. Budgeted overhead for the period was anticipated to be $1,000,000.
Required:
A. Determine the actual manufacturing overhead for the year.
B. Determine the amount of manufacturing overhead applied to production.
C. Is overhead under- or overapplied? By how much?
D. Compute the adjusted cost-of-goods-sold figure that should be disclosed on the company's income statement.
E. How many machine hours did Okanagan actually work during the year?
F. Compute budgeted machine hours for the year.

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Definitions:

Stability

The condition of being resistant to change or variation, often used in psychological contexts to refer to emotional or mental consistency.

Primary Drives

Basic, instinctual drives that motivate behaviors necessary for survival, such as hunger, thirst, and avoidance of pain.

Physiologically-Based

Pertaining to the explanation or functioning of a phenomenon based on the biological processes and physical activities of living organisms.

Unlearned

Unlearned refers to behaviors or responses that are not acquired through learning or experience but are instead innate or natural.