Required: Luzadis Company makes furniture using the latest automated technology 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 $1,066,000 of total manufacturing overhead for an estimated activity level of 82,000 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:
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? This preview shows page 1 - 3 out of 4 pages. Luzadis Company makes furniture using the latest automatedtechnology. The company uses a job-order costing system andapplies manufacturing overhead cost to products on the basisof machine-hours. The predetermined overhead rate wasbased on a cost formula that estimates $814,000 of totalmanufacturing overhead for an estimated activity level of74,000 machine-hours. During the year, a large quantity offurniture on the market resulted in cutting back productionand a buildup of furniture in the company's warehouse. Thecompany's cost records revealed the following actual cost andoperating data for the year: 60,000 782,000 $ Machine-hoursManufacturing overhead cost Inventories at year-end Rawmaterials Work in process (includes overhead applied of$39,600) Finished goods (includes overhead applied of$112,200) Coat of goods sold (includes overhead applied of$508,200) $ 17,000 $ 115,200 326,400 $ 1,478,400 Required:1. Compute the underapplied or overapplied overhead. 2.Assume that the company closes any underapplied or Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document End of preview. Want to read all 4 pages? Upload your study docs or become a Course Hero member to access this document Tags Generally Accepted Accounting Principles, Double entry bookkeeping system, Supply chain management terms, Finished Goods |