The Custom Guitar Company Uses a Predetermined Overhead Rate of $5

Essay

The Custom Guitar Company uses a predetermined overhead rate of $5 per machine hour to apply overhead. During the year, 32,500 machine hours were worked. Actual manufacturing overhead cost for the year was $187,500. Company records showed the following account balances at the end of the year:
$$\begin{array} { l r } \text { Materials } & \$ 22,500 \\\text { Work in process } & 37,500 \\\text { Finished goods } & 50,000 \\\text { Cost of goods sold } & 112,500\end{array}$$
Required:
a.Determine the amount of underapplied or overapplied overhead.
b.Assuming the amount of underapplied or overapplied overhead is material, determine underapplied or overapplied overhead that would be allocated to the following accounts if the allocation is made using ending account balances:
Work in Process
Finished Goods
Cost of Goods Sold
c.Assuming the amount of underapplied or overapplied overhead is material, calculate the new balance of the following accounts after underapplied or overapplied overhead has been allocated:
Work in Process
Finished Goods
Cost of Goods Sold
d.Determine the balance of Cost of Goods Sold if underapplied or overapplied overhead is immaterial.