Question

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 $108,000 of manufacturing overhead for an estimated allocation base of $90,000 direct material dollars to be used in production. The company has provided the following data for the just completed year 130,000 86,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building 86, 3pe 8,800 17,000 12,000 11,900 33,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 26,000 $ 18,000 $ 46,eee $ 38,000 $ 71,000 $ 60,000

Answer 1

1)	predetermined overhead rate
	Estimated manufacturing overhead/direct materials used
	108,000/90,000
	120.00%	answer
	Direct materials used
	Beginning raw materials				26,000
	Add purchase of raw materials				130,000
	Raw materials available for use				156,000
	less ending raw materials				18,000
	Direct materials used				138,000
	Applied overhead 138000*120%=					165600
	Actual manufacturing overhead
	Indirect labor				86,300
	property taxes				8,800
	Depreciation of Equipment				17,000
	Maintenance				12,000
	Insurance				11,900
	Rent,building				33,000
	total actual manufacturing overhead				169,000	169,000
2)	overhead under applied					3,400	answer
3)	Cost of goods manufactured
	Direct materials used
	Beginning raw materials				26,000
	Add purchase of raw materials				130,000
	Raw materials available for use				156,000
	less ending raw materials				18,000
	Direct materials used					138,000
	Add: Direct labor					86,000
	applied manufacturing overhead					165600
	total manufacturing cost					389,600
	Add:Beginning work in process					46,000
						435,600
	less Ending work in process					38,000
	Cost of goods manufactured for the year					397,600	answer
4)	Cost of goods sold
	beginning finished goods inventory					71,000
	Add cost of goods manufactured for the year					397,600
	cost of goods available for used					468,600
	less ending finished goods inventory					60,000
	unadjusted cost of goods sold					408,600	answer
	under applied or overapplied overhead may be closed directly to
	cost of goods sold
5)	Direct materials					8,700
	Direct labor					18,860
	manufacturing overhead (120% 0f DM)					10440
	Work in process inventory					38,000