poration Has A Marl 2060 2 BB uses a predetermined manufact

poration Has A Marl+ ? 2060 2 B&B; uses a predetermined manufacturing overhead rate based on machine-hours. For the month of October Estimated overhead cost Actual overhead cost Estimated machine hours Actual machine hours 300,000 375,000 10,000 11,000 Before disposition of the underapplied/overapplied overhead, balances from B&B;\'s accounting records on October 30th are as follows: Sales Cost of Goods Sold 1,200,000 720,000 t (00,000 Inventories: Work in Process Finished Goods 80,000 100,000 460,000 or underapplied overhead is allocated to applicable inventories and cost of goods sold based on Overapplied month end balances. In B&B;\'s October income statement, it should report cost of goods sold of A S 684,500 B. S720,000 756,000 s 757,000 O DOD 330,000 Atylied - 3 7S,poo 4 S,000 Unde Type here to search /u PrtScn End FS F6 4

Solution

Solution 2:

Pre determined manufacturing overhead rate = Estimated overhead / Estimated machine hours

= $300,000 / 10000 = $30 per machine hour

Overhead applied = 11000 * $30 = $330,000

Actual overhead = $375,000

Underapplied overhead = $375,000 - $330,000 = $45,000

Underapplied overhead to be closed to COGS = $45,000 * COGS / (COGS + Ending WIP + Ending finished goods inventory)

=$45,000 * $720,000/($720,000 + $80,000 + $100,000) = $36,000

Cost of goods sold to be reported in income statement of october = $720,000 + $36,000 = $756,000

Hence option D is correct.

Solution 20:

Cost of idle capacity = $100,000

Idle hours = 25000 - 20000 = 5000 hours

Normal overhead rate = $100,000 / 5000 = $20 per DLH

Cost of idle capacity will be allocated to expected usage of direct labor hours, therefore cost of idle capacity per direct labor hour of usage = $100,000 / 20000 = $5 per DLH

Pre determined overhead rate = Normal rate + idle rate = $20 + $5 = $25 per DLH

Hence option A is correct.