Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $651,000 of total manufacturing overhead for an estimated activity level of 93,000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $41,440) Finished goods (includes overhead applied of $98,420) Cast of goods sold (includes overhead applied of $378,140) 74,000 $ 618,000 $ 11,000 $ 146,400. $ 347,700 $ 1,335,900 Required: 1. Compute the underapplied or overapplied overhead. 2. Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead Is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?

Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter4: Accounting For Factory Overhead
Section: Chapter Questions
Problem 14P: Abbey Products Company is studying the results of applying factory overhead to production. The...
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Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 4
Compute the underapplied or overapplied overhead.
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Required 3
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View transaction list
Required 1 Required 2
Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate Journal entry.
(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Journal entry worksheet
<
Required 3 Required 4
Record the entry to close the balance in the manufacturing overhead account
to the cost of goods sold account.
Note: Friter debits before credits
Event
Show Transcribed Text
View transaction list
General Journal
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3 Required 4
Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and
Cost of Goods Sold. Prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry
required in the first account field.)
Journal entry worksheet
Note: Enter debts before credits.
Event
Required 1
Required 2 >
Record the allocation of the underapplied/overapplied overhead to various
accounts
General Journal
Show Transcribed Text
Debit Credit
Required 2 Required 3
Required 4
Complete this question by entering your answers in the tabs below.
Debit Credit
Not operating income will be
overhead is allocated rather than closed entirely to cost of goods sold.
c
How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in
Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?
the
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 4 Compute the underapplied or overapplied overhead. Show Transcribed Text Required 3 Complete this question by entering your answers in the tabs below. View transaction list Required 1 Required 2 Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate Journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet < Required 3 Required 4 Record the entry to close the balance in the manufacturing overhead account to the cost of goods sold account. Note: Friter debits before credits Event Show Transcribed Text View transaction list General Journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) Journal entry worksheet Note: Enter debts before credits. Event Required 1 Required 2 > Record the allocation of the underapplied/overapplied overhead to various accounts General Journal Show Transcribed Text Debit Credit Required 2 Required 3 Required 4 Complete this question by entering your answers in the tabs below. Debit Credit Not operating income will be overhead is allocated rather than closed entirely to cost of goods sold. c How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? the
Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies
manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost
formula that estimates $651,000 of total manufacturing overhead for an estimated activity level of 93,000 machine-hours.
During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the
company's warehouse. The company's cost records revealed the following actual cost and operating data for the year:
Machine-hours
Manufacturing overhead cost
Inventories at year-end:
Raw materials
Work in process (includes overhead applied of $41,440)
Finished goods (includes overhead applied of $98,420)
Cast of goods sold (includes overhead applied of $378,140)
74,000
$ 618,000
$ 11,000
$ 146,400
$ 347,700
$ 1,335,900
Required:
1. Compute the underapplied or overapplied overhead.
2. Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal
entry.
3. Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods,
and Cost of Goods Sold. Prepare the appropriate journal entry.
4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process.
Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?
Transcribed Image Text:Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $651,000 of total manufacturing overhead for an estimated activity level of 93,000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $41,440) Finished goods (includes overhead applied of $98,420) Cast of goods sold (includes overhead applied of $378,140) 74,000 $ 618,000 $ 11,000 $ 146,400 $ 347,700 $ 1,335,900 Required: 1. Compute the underapplied or overapplied overhead. 2. Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process. Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?
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