Luzadis company makes furniture using the latest automated
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 following estimates were used in preparing the predetermined overhead rate at the beginning of the year:
| Machine-hours | 88,000 | |
| Fixed manufacturing overhead cost | $ | 1,275,000 |
| Variable manufacturing overhead per computer-hour | $ | 3.70 |
|
During the year, a glut 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 | 40,000 | |
| Manufacturing overhead cost | $ | 793,000 |
| Inventories at year-end: | ||
| Raw materials | $ | 420,000 |
| Work in process (includes overhead applied of 43,656) | $ | 170,000 |
| Finished goods (includes overhead applied of 160,072) | $ | 1,040,000 |
| Cost of goods sold (includes overhead applied of 523,872) | $ | 2,720,000 |
| Required: |
| 1. |
Compute the company's predetermined overhead rate for the year. (Round your answer to 2 decimal places.) |
| 2. |
Compute the underapplied or overapplied overhead for the year. (Round your intermediate calculations to 2 decimal places.) |
| 5. |
How much higher or lower will net operating income be for the year if the underapplied or overapplied overhead is allocated rather than closed directly to Cost of Goods Sold? (Round your intermediate calculations to 2 decimal places.) |
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Rating:
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