Question

Please help! And please explain how to get answers so I can learn how to do it on future problems. Thanks in advance! I'll be sure to give a thumbs up.

Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $130,200 of manufacturing overhead for an estimated allocation base of $93,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: 131,000 Purchase of raw materials $ 89,000 Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $117,900 $ 8,400 $ 16,000 $ 11,000 $ 8,700 $ 39,000 eginning Ending $ 26,000 $ 16,000 $ 47,000 $35,000 $ 69,000 $ 58,000 Raw Materials Work in Process Finished Goods Required: 1-a. Compute the predetermined overhead rate for the year. Predetermined overhead rate 1-b. Compute the amount of underapplied or overapplied overhead for the year. overhead

Answer 1

1 - a :
Predetermined overhead rate = Estimated manufacturing overhead / Estimated direct materials costs = 130200 / 93000	140%

1 - b :
Beginning raw materials	26000
(+) Purchase of raw materials	131000
Total raw materials available	157000
(-) Ending raw materials	16000
Raw materials used	141000
Overhead applied = Raw materials used * Predetermined overhead rate = 141000 * 140%	197400
Indirect labor	117900
Property taxes	8400
Depreciation of equipment	16000
Maintenance	11000
Insurance	8700
Rent, building	39000
Actual overhead costs	201000
As the overhead applied are less than the actual overhead costs, the overheads are underapplied
Underapplied overhead = Actual overhead costs - Overhead applied = 201000 - 197400	3600

Underapplied

Overhead

3600

2 :
Gitano Products
Schedule of cost of goods manufactured
Direct materials :
Beginning raw materials	26000
Purchase of raw materials	131000
Total raw materials available	157000
Ending raw materials	16000
Raw materials used in production		141000
Direct labor cost		89000
Manufacturing overhead applied		197400
Total manufacturing costs		427400
Beginning work in process		47000
Total cost of work in process		474400
Ending work in process		35000
Cost of goods manufactured		439400

3 :
Cost of goods manufactured	439400
(+) Beginning finished goods	69000
(-) Ending finished goods	58000
Unadjusted cost of goods sold	450400

4 :
	Job 215
Direct materials	3200
Direct labor cost	4500
Manufacturing overhead ( 140% * 3200 )	4480
Total cost	12180
(+) Markup @ 55%	6699
Price to customer	18879

5 :
Direct materials	8400
Direct labor cost ( 35000 - 8400 - 11760 )	14840
Manufacturing overhead ( 8400 * 140% )	11760
Work in process inventory	35000