3a Compute over or underapplied manufacturing overhead Round

3-a. Compute over- or underapplied manufacturing overhead. (Round your answer to 2 decimal places.)



3-b. If the balance in the Manufacturing Overhead account is closed directly to Cost of Goods Sold, will Cost of Goods Sold increase or decrease?

4. Prepare Lamonda’s cost of goods manufactured report for April. (Round your answers to 2 decimal places.)

Lamonda Corp. uses a job order cost system. On April 1, the accounts had balances as shown in the T-accounts below:

The following transactions occurred during April:

(a) Purchased materials on account at a cost of $233,270.
(b) Requisitioned materials at a cost of $112,100, of which $16,800 was for general factory use.
(c) Recorded factory labor of $224,900, of which $43,075 was indirect.
(d) Incurred other costs:

(e) Applied overhead at a rate equal to 130 percent of direct labor cost.
(f) Completed jobs costing $262,250.
(g) Sold jobs costing $323,370.
(h) Recorded sales revenue of $513,000.

Solution

4) Cost of Goods Manufactured for April :

3a) Over/Under Manufacturing Overhead applied :

Manufactured Overhead Applied = 236372.50

Less: Actual Manufacturing Overhead = - 114675

(16800 + 43075 + 23300 +10800 + 20700)   

Over-applied manuf. overhead = $121897.50

3b) COGS decreases by $121897.50 when Manufacturing Overhead account is closed directly to Cost of Goods Sold. This is because the manufacturing overhead is over-applied to the manufactured Goods.

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