Question

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Problem 3-14 Schedule of Cost of Goods Manufactured; Overhead Analysis [LO3-3, LO3-4) 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 $123,200 of manufacturing overhead for an estimated allocation base of $88.000 direct material dollars to be used in production. The company has provided the following data for the just completed year. $ $ 134.000 34,000 $ Purchase of raw materials Direct Labor cost Manufacturing overhead costs: Indirect Labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building 122,700 8,500 18,000 14,000 7,90 38,000 $ Raw Materials Work in Process Inished Goods Beginning Ending $ 23,000 $ 10,000 $ 49,000 $38.000 $ 68,000 $56.000 Required: 1. Compute the predetermined overhead rate for the year 2. Compute the amount of underapplied or overapplied overhead for the year 3. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials 4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer 5. Assume that the 538.000 ending balance in Work in Process includes $8.900 of direct materials. Given this assumption, supply the Information missing below Complete this question by entering your answers in the tabs below. Required: Required 2 Required Compute the predetermined overhead rate for the

Answer 1

Required 1 :
Predetermined overhead rate = Estimated manufacturing overhead / Estimated direct materials costs = 123200 / 88000	140%

Required 2 :
Beginning raw materials	23000
(+) Purchase of raw materials	134000
Total raw materials available	157000
(-) Ending raw materials	10000
Raw materials used	147000
Overhead applied = Raw materials used * Predetermined overhead rate = 147000 * 140%	205800
Indirect labor	122700
Property taxes	8500
Depreciation of equipment	18000
Maintenance	14000
Insurance	7900
Rent, building	38000
Actual overhead costs	209100
As the overhead applied are less than the actual overhead costs, the overheads are underapplied
Underapplied overhead = Actual overhead costs - Overhead applied = 209100 - 205800	3300

Underapplied

Overhead

3300

Required 3 :
Gitano Products
Schedule of cost of goods manufactured
Direct materials :
Beginning raw materials	23000
Purchase of raw materials	134000
Total raw materials available	157000
Ending raw materials	10000
Raw materials used in production		147000
Direct labor cost		84000
Manufacturing overhead applied		205800
Total manufacturing costs		436800
Beginning work in process		49000
Total cost of work in process		485800
Ending work in process		38000
Cost of goods manufactured		447800

Required 4 :
Cost of goods manufactured	447800
(+) Beginning finished goods	68000
(-) Ending finished goods	56000
Unadjusted cost of goods sold	459800

Required 5 :
Direct materials	8900
Direct labor cost ( 38000 - 8900 - 12460 )	16640
Manufacturing overhead ( 8900 * 140% )	12460
Work in process inventory	38000