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:

Vickrey Auction

A sealed-bid auction where the highest bidder wins but pays the price bid by the second-highest bidder.

Foreclosed

A legal process in which a lender takes possession of a property after the borrower fails to make mortgage payments.

Expected Revenue

The projected amount of money that a company anticipates receiving from sales or services within a certain period.

Reserve Price

The minimum price set by the seller that must be met or exceeded at an auction for the sale to proceed.