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 $105,600 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: $ 138,000 $ 84,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ 94,900 $ 8,400 $ 16,000 $ 15,000 $ 7,300 $ 34,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 20,000 $ 15,000 $ 50,000 $ 39,000 $ 75,000 $ 57,000

Answer 1

3.

Beginning Balance, Raw Material	$         20,000
Add : Raw Material Purchased	$       138,000
Raw Material Available	$       158,000
Less : Ending Balance, Raw Material	$         15,000
Raw Material Consumed		$       143,000
Direct labor		$         84,000
Manufacturing Overhead applied		$       171,600	=105600/88000*143000
		$       398,600
Add : Beginning Balance, Work in Process		$         50,000
Less : Ending Balance, Work in Process		$         39,000
Cost of Goods Manufactured		$       409,600
Add : Beginning Balance, Finished Goods		$         75,000
Less : Ending Balance, Finished Goods		$         57,000
Unadjusted Cost of Goods Sold		$       427,600

4.

Direct Material	$            3,500
Direct Labor	$            4,500
Manufacturing Overhead	$            4,200	=105600/88000*3500
Total Cost	$         12,200
Margin @35%	$            4,270
Selling Price	$         16,470