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Posted by on Friday, October 5, 2007 at 7:52pm.

B3 Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:

Beginning Ending
Raw materia $26,000 $31,000
Work in process 77,000 59,000
Finished goods 124,000 139,000

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 24,000 machine-hours and incur $216,000 in manufacturing overhead cost. The following transactions were recorded for the year:

• Raw materials were purchased, $434,000.
• Raw materials were requisitioned for use in production, $429,000 ($405,000 direct and $24,000 indirect).
• The following employee costs were incurred: direct labor, $207,000; indirect labor, $79,000; and administrative salaries, $171,000.
• Selling costs, $103,000.
• Factory utility costs, $27,000.
• Depreciation for the year was $106,000 of which $97,000 is related to factory operations and $9,000 is related to selling and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 25,000 machine-hours.
• Sales for the year totaled $1,147,000.


a. Prepare a schedule of cost of goods manufactured in good form.

b. Was the overhead under- or overapplied? By how much?

Prepare an income statement for the year in good form. The company closes any under- or overapplied overhead to Cost of Goods Sold

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