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ACCT 386 - Week 2 - Homework - Question 1

ACCT 386 - Week 2 - Homework - Question 1
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ACCT 386 - Week 2 - Homework - Question 1

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Question 1

 

Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

  

 

 

  Computer-hours

 

87,000  

  Fixed manufacturing overhead cost

$

1,279,000  

  Variable manufacturing overhead per computer-hour

$

3.60  


 

During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year:

  

 

 

  Computer-hours

 

50,000  

  Manufacturing overhead cost

$

970,000  

  Inventories at year-end:

 

 

     Raw materials

$

420,000  

     Work in process

$

190,000  

     Finished goods

$

1,030,000  

  Cost of goods sold

$

2,800,000