Y Company Reported the Following Actual Costs Data for the Year

question 17

Essay

Y Company reported the following actual costs data for the year:
$$\begin{array} { | l | r | } \hline \text { Purchase of raw materials (all direct) } & \$ 200,000 \\\hline \text { Direct labour (average hourly rate of } \$ 20 ) & 320,000 \\\hline \text { Marufacturing overhead costs } & 100,000 \\\hline \text { Change in inventories: } & \\\hline \text { Increase in raw materials } & \$ 20,000\\\hline \text { Increase in work in process } & 16,000 \\\hline \text { Increase in finished goods } & 32,000\\\hline\end{array}$$
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:

Laissez-faire

An economic system in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, and tariffs.

Capitalist Economy

An economic system where private individuals and business owners control the production, distribution, and exchange of goods and services, typically driven by profit motives.

Central Planning

An economic system where all major production, investment, and allocation decisions are made by the government or a central authority.

Government Ownership

The situation in which assets, enterprises, or industries are owned and operated by the government rather than private individuals or companies.