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

###### Question:

Nicole Limited is a company that produces machinery to customer orders, using a normal job-order cost system. It applies manufacturing overhead to production using a predetermined rate. This overhead rate is set at the beginning of each fiscal year by forecasting the year’s overhead and relating it to direct labour costs. The budget for 2020 was as follows:
 Direct labour $1,810,000 Manufacturing overhead 905,000 As at the end of the year, two jobs were incomplete. These were 1768B, with total direct labour charges of$114,500, and 1819C, with total direct labour charges of $390,300. On these jobs, machine hours were 287 hours for 1768B and 647 hours for 1819C. Direct materials issued for 1768B amounted to$227,000, and for 1819C they amounted to $420,700. Total charges to the Manufacturing Overhead Control account for the year were$900,500, and direct labour charges made to all jobs amounted to $1,576,200, representing 247,900 direct labour hours. There were no beginning inventories. In addition to the ending work in process just described, the ending finished goods inventory account showed a balance of$561,960.

Sales for the year amounted to $6,204,300; cost of goods sold totalled$3,652,740; and sales, general, and administrative expenses were $1,853,700. The above amounts for inventories and the cost of goods sold have not been adjusted for any over- or under-application of manufacturing overhead to production. It is the company’s practice to allocate any over- or under-applied overhead to inventories and the cost of goods sold. Calculate the under- or over-applied manufacturing overhead for 2020. (Round answer to the nearest whole dollar, e.g. 5,275.)  Manufacturing overhead$ Over-applied Under-applied
Prorate the amount calculated in part (a) based on the ending balances (before prorating) of Work in Process, Finished Goods, and Cost of Goods Sold. (Round allocation percentage to 2 decimal places, e.g. 15.25% and final answers to the nearest whole dollar, e.g. 5,275.)
 Allocation Cost of goods sold $Finished goods inventory WIP inventory Total$
Prepare an income statement for the company for the year. The income tax rate is 40%. (Round answers to the nearest whole dollar, e.g. 5,275.)
 NICOLE LIMITED Income Statement For the Month Ended 2020For the Year Ended 2020 Adjusted cost of goods soldNet income before taxesTaxesGross profit / (Loss)Net income / (Loss)Beginning balance, January 1Operating expensesEnding balance, December 31Sales $AddLess : Adjusted cost of goods soldBeginning balance, January 1TaxesEnding balance, December 31SalesNet income / (Loss)Gross profit / (Loss)Operating expensesNet income before taxes SalesAdjusted cost of goods soldNet income before taxesEnding balance, December 31Net income / (Loss)Beginning balance, January 1Gross profit / (Loss)Operating expensesTaxes AddLess : TaxesEnding balance, December 31Adjusted cost of goods soldSalesGross profit / (Loss)Net income / (Loss)Beginning balance, January 1Operating expensesNet income before taxes SalesOperating expensesTaxesAdjusted cost of goods soldNet income before taxesGross profit / (Loss)Net income / (Loss)Beginning balance, January 1Ending balance, December 31 SalesNet income / (Loss)Ending balance, December 31Operating expensesNet income before taxesBeginning balance, January 1Gross profit / (Loss)TaxesAdjusted cost of goods sold Beginning balance, January 1Operating expensesNet income before taxesEnding balance, December 31TaxesNet income / (Loss)SalesAdjusted cost of goods soldGross profit / (Loss)$

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