Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year's operation of the company are presented below. January 1 December 31
Direct materials $77,000 $40,000
Work in process 66,000 42,000
Finished goods 115,000 100,000
Other information
Direct materials purchases $324,000
Cost of goods available for sale 950,000
Actual factory overhead costs 260,000
The amount of underapplied or overapplied overhead is: .
a. $60,000 overapplied.
b. $60,000 underapplied.
c. $10,000 overapplied.
d. $10,000 underapplied.
e. $0.

d. $10,000 underapplied.

Explanation:

Cost of goods manufactured = Cost of goods available for sale - Beginning Finished goods

Cost of goods manufactured = 950000 - 115000

Cost of goods manufactured = $835,000

Total manufacturing Costs = Cost of goods manufactured + Ending Work in process - Beginning Work in process

Total manufacturing Costs = 835000 + 42000 - 66000

Total manufacturing Costs = $811,000

Direct Materials used = 77000 + 324000 - 40000

Direct Materials used = $361,000

Direct Materials used + Direct Labor + Factory Overhead applied = Total Manufacturing costs

361000 + Direct labor + 125% of Direct labor = 811000

225% of Direct labor = $811000 - $361000

225% of Direct labor = $450000

Direct labor = $450000 / 225%

Direct labor = $200,000

Factory Overhead applied = $200,000*125%

Factory Overhead applied = $250,000

Underapplied Overhead = Actual Overhead - Applied Overhead

Underapplied Overhead = $260000 - $250000

Underapplied Overhead = $10,000 (underapplied)

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