Bieler & Cie of Altdorf, Switzerland, 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:

The currency in Switzerland is the Swiss franc, which is denoted by Sfr. During the year, a glut of furniture on the market resulted in cutting back production and a build-up of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year:

Required
1. Compute the company’s predetermined overhead rate.
2. Compute the underapplied or overapplied overhead.
3. Assume that the company closes any underapplied or overapplied overhead directly to Cost of Goods Sold. Prepare the appropriate journal entry.
4. Assume that the company allocates any underapplied or overapplied overhead to Work in Progress, Finished Goods, and Cost of Goods Sold on the basis of the amount of overhead applied in each account. Prepare the journal entry to show the allocation for the year.
5. How much higher or lower will profit be if the underapplied or overapplied overhead is allocated rather than closed directly to Cost of Goods Sold?

Transcribed Image Text:

Machine-hours Manufacturing overhead cost 75,000 Sfr900,000