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The Manokin Basket Company uses normal job order costing in its only production department. Overhead is applied to jobs by a predetermined rate,...
of December 31, 2014.
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Page Two of Take Home Quiz 1, ACCT 208 16F
B. Without preparing a schedule or making any computations, what is the Cost of Goods Manufactured for December, 2014?
C. Compute the predetermined overhead rate for 2015.
D. Prepare, in good form, a fully complete Schedule of Cost of Goods Manufactured for 2015.
E. Add together the total cost charged to Jobs 1001 and 1002. Does the answer equal the amount of Cost of Goods Manufactured that you got in Part D? Should it?
F. Compute the underapplied or overapplied overhead for 2015.
G. Prepare, in good form, an income statement for 2015.
H. Now assume that you are to allocate (prorate) the underapplied or overapplied overhead to the appropriate accounts. You should be able to figure out how much applied overhead is in Work in Process (just Job 1003). You can assume that there is $89,000 of applied overhead in Finished Goods. Based on the total applied overhead for the year, you should now be able to figure out how much applied overhead should be in Cost of Goods Sold. Do the proration and show your calculations.
I. If you were to prepare a new income statement, after prorating underapplied or overapplied overhead, would income be higher or lower than what you got in Part G? By how much? (This is a 2 part question.)
