PROBLEM 3-43 (35 MINUTES)

1.

Predetermined overhead rate = budgeted overhead budgeted direct-labor cost

= $2,730,000 $2,100,000 = 130% of direct labor

cost
2.

Additions (debits) total $7,802,500 [$2,800,000 + $2,175,000 + ($2,175,000 x 130%)].

3.

The finished-goods inventory consisted of job no. 3154, which cost $175,750
[$78,000 + $42,500 + ($42,500 x 130%)].

4.

Since there is no work in process at year-end, all amounts in the Work-in-Process

account must be transferred to Finished-Goods Inventory. Thus:
Finished-Goods Inventory.......................................7,880,900*
Work-in-Process Inventory..........................

7,880,900

*Beginning balance in Work-in-Process Inventory + additions to the account:

$78,400 + $7,802,500 = $7,880,900
5.

BBBCs applied overhead totals 130% of direct-labor cost, or $2,827,500 ($2,175,000

x 130%). Actual overhead was $2,777,000, itemized as follows, resulting in
overapplied overhead of $50,500.
Indirect materials used........................................... $ 32,500
Indirect labor........................................................... 1,430,000
Factory depreciation...............................................
870,000
Factory insurance...................................................
29,500
Factory utilities.......................................................
415,000
Total
$2,777,000
..................................................................................
Manufacturing Overhead..........................................
Cost of Goods Sold......................................

50,500
50,500

PROBLEM 3-43 (CONTINUED)

6.

The companys cost of goods sold totals $7,654,650:

Finished-goods inventory, Jan. 1.
Add: Cost of goods manufactured..
Cost of goods available for sale...
Less: Finished-goods inventory, Dec. 31..
Unadjusted cost of goods sold.
Less: Overapplied overhead.
Cost of goods sold...

7.

0
7,880,900
$ 7,880,900
175,750
$ 7,705,150
50,500
$ 7,654,650

No, selling and administrative expenses are operating expenses of the firm and are
treated as period costs rather than product costs. Such costs are unrelated to
manufacturing overhead and cost of goods sold.

PROBLEM 3-49 (45 MINUTES)

1.

SUPERIOR METALS
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED DECEMBER 31, 20X4
Direct material:
Raw material inventory, 12/31/x3........................
Add: Purchases of raw material...........................
Raw material available for use..............................
Deduct: Raw-material inventory, 12/31/x4............
Raw material used.................................................
Direct labor....................................................................
Manufacturing overhead:
Indirect material.....................................................
Indirect labor..........................................................
Depreciation on factory building..........................
Depreciation on factory equipment......................
Utilities....................................................................
Property taxes........................................................
Insurance................................................................
Total actual manufacturing overhead.............
Deduct: Underapplied overhead*...................
Overhead applied to work in process..................
Total manufacturing costs...........................................
Add: Work-in-process inventory, 12/31/x3..................
Subtotal.........................................................................
Deduct: Work-in-process inventory, 12/31/x4.............
Cost of goods manufactured.......................................

$66,750
548,250
$615,000
44,250

$33,750
112,500
93,750
45,000
52,500
67,500
30,000
$435,000
1,875

$570,750
355,500

433,125
$1,359,375
-0$1,359,375
30,000
$1,329,375

*The Schedule of Cost of Goods Manufactured lists the manufacturing costs applied to
work in process. Therefore, the underapplied overhead, $1,875, must be deducted from total
actual overhead to arrive at the amount of overhead applied to work in process. If there had
been overapplied overhead, the balance would have been added to total manufacturing
overhead.
The amount of underapplied overhead is found by subtracting the applied
manufacturing overhead, $433,125, from the total actual manufacturing overhead, $435,000.

PROBLEM 3-49 (CONTINUED)

2.

SUPERIOR METALS
SCHEDULE OF COST OF GOODS SOLD
FOR THE YEAR ENDED DECEMBER 31, 20X4
Finished-goods inventory, 12/31/x3.......................................................
Add: cost of goods manufactured..........................................................
Cost of goods available for sale.............................................................
Deduct: Finished-goods inventory, 12/31/x4.........................................
Cost of goods sold..................................................................................
Add: Underapplied overhead*................................................................
Cost of goods sold (adjusted for underapplied overhead)..................

$ 26,250
1,329,375
$1,355,625
30,000
$1,325,625
1,875
$1,327,500

*The company closes underapplied or overapplied overhead into cost of goods sold. Hence
the $1,875 balance in underapplied overhead is added to cost of goods sold for the month.
3.

SUPERIOR METALS
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X4
Sales revenue...........................................................................................
Less: Cost of goods sold........................................................................
Gross margin............................................................................................
Selling and administrative expenses.....................................................
Income before taxes................................................................................
Income tax expense.................................................................................
Net income................................................................................................

$1,578,750
1,327,500
$ 251,250
201,750
$49,500
18,750
$30,750

4.
In the electronic version of the solutions manual, press the CTRL key and click on the following
link: 10E - BUILD A SPREADSHEET 03-49.XLS