uzadis Company makes furniture using the latest automated technology. The company uses a ob-order costing system and applies manufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formula that estimates -592,000 of total manufacturing overhead for an estimated activity level of 74,000 machine- ours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and uild inventories. The company provided the following data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $37,520) Finished goods (includes overhead applied of $101,840) Cost of goods sold (includes overhead applied of $396,640) Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume the company allocates 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 67,000 $ 551,000 Compute the underapplied or overapplied overhead. $ 13,000 $ 139,300 $ 378,100 $ 1,472,600

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Chapter1: Financial Statements And Business Decisions
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uzadis Company makes furniture using the latest automated technology. The company uses a
ob-order costing system and applies manufacturing overhead cost to products based on
nachine-hours. The predetermined overhead rate was based on a cost formula that estimates
$592,000 of total manufacturing overhead for an estimated activity level of 74,000 machine-
ours.
During the year, a large quantity of furniture on the market caused Luzadis to cut production and
puild inventories. The company provided the following data for the year:
Machine-hours
Manufacturing overhead cost
Inventories at year-end:
Raw materials
Work in process (includes overhead applied of $37,520)
Finished goods (includes overhead applied of $101,840)
Cost of goods sold (includes overhead applied of $396,640)
Required:
1. Compute the underapplied or overapplied overhead.
2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold.
Prepare the appropriate journal entry.
Complete this question by entering your answers in the tabs below.
3. Assume the company allocates 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?
Required 1
Required 2
Required 3
67,000
$ 551,000
Required
Compute the underapplied or overapplied overhead.
$ 13,000
$ 139,300
$ 378,100
$ 1,472,600
Transcribed Image Text:uzadis Company makes furniture using the latest automated technology. The company uses a ob-order costing system and applies manufacturing overhead cost to products based on nachine-hours. The predetermined overhead rate was based on a cost formula that estimates $592,000 of total manufacturing overhead for an estimated activity level of 74,000 machine- ours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and puild inventories. The company provided the following data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $37,520) Finished goods (includes overhead applied of $101,840) Cost of goods sold (includes overhead applied of $396,640) Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. Complete this question by entering your answers in the tabs below. 3. Assume the company allocates 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? Required 1 Required 2 Required 3 67,000 $ 551,000 Required Compute the underapplied or overapplied overhead. $ 13,000 $ 139,300 $ 378,100 $ 1,472,600
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