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New Age Electronics manufactures surround sound systems and allocates overhead costs using direct-labor hours. They pay...

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Accounting

New Age Electronics manufactures surround sound systems andallocates overhead costs using direct-labor hours. They pay theirassembly line workers $15 per hour. Unadjusted Cost of Goods Soldfor the year was $598,500. Estimated accounting information for theyear is as follows:

Overhead costs $140,000

Direct materials $355,000

Direct labor costs (7,000 hours @ $15/hour) $105,000

Direct labor hours 7,000

Machine hours 8,000 Actual accounting information incurred forthe year was as follows:

Direct materials $350,000

Direct labor (7,100 hours @ $15/hour) $106,500

Production Manager’s Salary $ 25,000

Customer 800# order line $ 2,000

Plant rent $ 75,000

Depreciation on plant and equipment $ 50,000

Marketing expense $ 20,000

Plant utilities $ 19,000

Indirect materials $ 1,000

Delivery expenses to customers $ 5,000

Depreciation on office equipment $ 5,000

Machine hours 7,900

What actual amount of overhead costs were incurred?

Was overhead under or over allocated/applied and by howmuch?

$28,000 under-allocated/applied $30,000 under-allocated/applied$28,000 over-allocated/applied $30,000 over-allocated/applied

What is the adjusted Cost of Goods Sold amount?

Answer & Explanation Solved by verified expert
3.5 Ratings (582 Votes)

1)

Actual overhead cost
Production manager salary 25000
Plant rent 75000
Depreciation on plant and equipment 50000
Plant utilities 19000
Indirect material 1000
Total actual manufacturing overhead 170000

b)

Predetermined overhead rate =Estimated overhead /estimated direct labor hours

                            = 140000/7000  

                            = $ 20 per direct labor hours

Allocated overhead =Actual direct labor hours *Predetermined overhead rate

                      = 7100 *20

                       = $ 142000

Under allocated /(over allocated) overhead =Actual overhead -Applied overhead

                                          = 170000-142000

                                         = $ 28000 under allocated .

c)

Adjusted cost of goods sold = Unadjusted Cost of Goods Sold +under allocated overhead

                                    = 598500+28000

                                    = $ 626500

       
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