Ravsten Company uses a job-order costing system.
The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 40,000 machine-hours and incur $178,000 in manufacturing overhead cost. The following transactions occurred during the year:
a. Raw materials requisitioned for use in production, $194,000 (70% direct and 30% indirect).
b. The following costs were incurred for employee services:
|
Direct labor
|
|
|
|
|
Indirect labor
|
$
|
164,000
|
|
Sales commissions
|
$
|
22,000
|
|
Administrative salaries
|
$
|
14,000
|
|
$
|
29,000
|
c. Heat, power, and water costs incurred in the factory, $46,000.
d. Insurance costs, $14,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
e. Advertising costs incurred, $54,000.
f. Depreciation recorded for the year, $64,000 (75% relates to factory operations, and 25% relates to selling and administrative activities).
g. The company used 44,000 machine-hours during the year.
h. Goods that cost $484,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Sales for the year totaled $708,000. The total cost to manufacture these goods according to their job cost sheets was $479,000.
Required:
1. Determine the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.).
2. Prepare an income statement for the year. (Hint: No calculations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead.) (Round predetermined overhead rate to 2 decimal places.)