Durham Company uses a job-order costing system. The following transactions took place last year:

a. Raw materials requisitioned for use in production, $40,000 (80% direct and 20% indirect)
b. Factory utility cost incurred, $14,600
c. Depreciation recorded on plant and equipment, $28,000. Three-fourths of the depreciation relates to factory equipment, and the remainder relates to selling and administrative equipment.
d. Costs for salaries and wagers were incurred:
Direct labor : $40,000 Indirect labor: $18,000 Sales commissions: $10,000 Administrative salaries: $25,000
e. Insurance costs incurred, $3,000 (80% relates to factory operations, and 20% relates to selling and administrative activities)
f. Miscellaneous selling and administrative expenses incurred, $18,000
g. Manufacturing overhead was applied to production. The company applies overhead on the basis of 150% of direct labor cost.
h. Goods that cost $130,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
i. Goods that had cost $120,000 to manufacture according to their job cost sheets were sold for $200,000

Required:

1. Determine the under applied or over applied overhead for the year
2. Prepare an income statement for the year (hint: no calculation are required to determine the cost of goods sold before any adjustment for under-applied or over-applied overhead.)

Answer rating: 100% (QA)

Step 14 The Manufacturing Overhead is calculated as follows Manufacturing ... View the full answer