IIF Industries Uses a Job-Order Costing System and Applies Overhead

question 57

Essay

IIF Industries uses a job-order costing system and applies overhead on the basis of direct labour hours.
At the beginning of 2006, management estimated that 200,000 direct labour hours would be worked and $600,000 of overhead costs would be incurred.
During the year, the company actually worked 220,000 direct labour hours and incurred the following manufacturing costs: a. Calculate the budgeted factory overhead application rate for 2006.
b. Determine the amount of manufacturing overhead applied to work in process during 2006.
c. Determine the amount of underapplied or overapplied overhead for the year.
d. If goods with a cost of $1,500,000 were completed and transferred to finished goods during 2006, determine the cost of work in process at the end of the period.
e. Prepare the journal entry to close underapplied or overapplied overhead to cost of goods sold.

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Definitions:

Self-Fulfilling

A prediction or expectation that causes itself to become true due to the behavior it induces.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, which affects purchasing power and inflation.

Approaches

Various methods or strategies employed to tackle problems, execute tasks, or achieve goals.