Minstrel Manufacturing Uses a Job Order Costing System

question 76

Multiple Choice

Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost.
- If Minstrel incurred total overhead costs of $167,800 during the month, compute the amount of under- or overapplied overhead:

• A) $57,200 overapplied.
• B) $2,800 underapplied.
• C) $17,800 overapplied.
• D) $2,800 overapplied.
• E) $17,800 underapplied.

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Definitions:

Direct Materials Used

The raw materials directly traced to the manufacturing of a product and included in its cost.

Actual Overhead

The actual incurred costs associated with running a production or operation, excluding direct materials and direct labor.

Cost of Goods Sold

Costs directly related to the manufacturing of goods a company sells, which cover materials and workforce expenses.

Finished Goods Inventory

The stock of completed products that are ready to be sold but have not yet been sold.