# Nicole Limited is a company that produces machinery to customer orders, using a normal job-order cost system. It applies manufact

a)

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Budget for 2016:

Direct labor=\$1,800,000

Applied overhead rate=(900000/1800000)=0.5\$ per \$ of direct labor cost

Direct labor charges during the year=\$1,583,600

Under applied overhead cost=(897000-791800)= \$ 105,200

Work in process: CALCULATION OF Work in process balance at the end of the year is given below:

 1768B 1819C Total Direct labor \$110,000 \$390,000 \$500,000 Direct material \$220,000 \$420,000 \$640,000 Applied overhead(50% of direct labor) \$55,000 \$195,000 \$250,000 Total Work in process \$385,000 \$1,005,000 \$1,390,000

Finished goods inventory: Ending finished goods inventory=\$720,000

Cost of goods sold:\$3,935,000

The under applied overhead cost of \$105,200 needed to prorate on work in process , finished goods and cost of goods sold.

CALCULATION OF PRORATING IS GIVEN BELOW:

 PRORATING OF UNDERAPPLIED OVERHEAD A B C D=C*105200 Amount Prorate factor calculation Prorate factor Prorated amount Work in process inventory 1390000 (1390000/6045000)= 0.2299421 \$24,190 Finished goods inventory 720000 (720000/6045000)= 0.1191067 \$12,530 cost of goods sold 3935000 (3935000/6045000)= 0.6509512 \$68,480 Total 6045000

c)INCOME STATEMENT:

Cost of goods sold=(3935000+68480)= \$ 4,003,480

 INCOME STATEMENT Sales \$6,201,355 Less:Cost of goods sold \$4,003,480 Gross Profit \$2,197,875 Less:Sales, general and admin. Expenses \$1,857,870 Income before taxes \$340,005 Income tax (40%) \$136,002 NET INCOME AFTER TAXES \$204,003

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