Question - A review of the records of Pilgrim, Inc., a new company, disclosed the following year-end information:
Manufacturing Overhead account: Contained debits of $872,000, which included $20,000 of sales commissions.
Work-in-Process Inventory account: Contained charges for overhead of $875,000.
Cost-of-Goods-Sold account: Contained a year-end debit balance of $3,680,000. This amount was computed prior to any year-end adjustment for under- or overapplied overhead.
Pilgrim applies manufacturing overhead to production by using a predetermined rate of $20 per machine hour. Budgeted overhead for the period was anticipated to be $900,000.
Required:
A. Determine the actual manufacturing overhead for the year.
B. Determine the amount of manufacturing overhead applied to production.
C. Is overhead under- or overapplied? By how much?
D. Compute the adjusted cost-of-goods-sold figure that should be disclosed on the company's income statement.
E. How many machine hours did Pilgrim actually work during the year?
F. Compute budgeted machine hours for the year.