X Company Reported the Following Actual Cost Data for the Year

question 4

Essay

X Company reported the following actual cost data for the year:
$\begin{array}{|l|r|}\hline \text { Purchase of raw materials (all direct) } & \$ 266,000 \\\hline \text { Direct labour cost } & 160,000 \\\hline \text { Manufacturing overhead costs } & 246,000\\\hline \text { Change in inventories: } & \\\hline \text { Decrease in raw materials } &\$ 10,000 \\\hline \text { Decrease in work in process } & 8,000\\\hline \text { Decrease in finished goods } & 16,000\\\hline\end{array}$
X 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:

Coercive Power

A form of power that is based on the ability to deliver punishments or sanction undesirable behaviors.

Coercive Power

The ability to compel or force someone to do something through threats or force.

Legitimate Power

Power that is officially sanctioned by an organization or institution, and is accepted by members as rightly exercised.

Reward Power

The ability of a person to influence others' actions, behaviors, or attitudes by offering them something desirable.