Question

4 Dobson Manufacturing Company uses a job order cost system with manufacturing overhead applied to products on the basis of direct labor dollars. At the beginning of the most recent period, the company estimated its total direct labor cost to be $52,500 and its total manufacturing overhead cost to be $84,000. Several incomplete general ledger accounts show the transactions that occurred during the most recent accounting period which is given in second requirement. Required 1. Calculate the predetermined overhead rate Predetermined Overhead Rate % of Direct Labor Cost

Answer 1

Solution 1:

Predetermined overhead rate = Estimated overhead cost / Estimated direct labor cost = $84,000 / $52,500 = 160% of Direct labor cost

Solution 2:

Raw Materials Inventory
Particulars	Debit	Particulars	Credit
Beginning balance	$13,800.00	Material used	$79,400.00
Purchases	$94,400.00
Ending Balance	$28,800.00

Work In Process Inventory
Particulars	Debit	Particulars	Credit
Beginning balance	$29,400.00	Cost of goods completed	$184,620.00
Direct materials	$69,900.00
Direct labor	$40,200.00
Applied overhead (160% of DL cost)	$64,320.00
Ending balance	$19,200.00

Finished goods inventory
Particulars	Debit	Particulars	Credit
Beginning balance	$40,600.00	Cost of goods sold	$177,120.00
Cost of goods completed	$184,620.00
Ending balance	$48,100.00

Cost of goods sold
Particulars	Debit	Particulars	Credit
Unadjusted cost of goods sold	$177,120.00	Overapplied overhead	$13,520.00
Adjusted cost of goods sold	$163,600.00

Manufacturing Overhead
Particulars	Debit	Particulars	Credit
Indirect materials	$9,500.00	Applied overhead	$64,320.00
Indirect labor	$13,600.00
Factory depreciation	$11,900.00
Factory rent	$6,000.00
Factory utilities	$1,600.00
Other factory cost	$8,200.00
Actual overhead	$50,800.00

Sales Revenue
Particulars	Debit	Particulars	Credit
		Accounts receivables	$320,000.00

Selling, general and administrative expenses
Particulars	Debit	Particulars	Credit
Admn Salaries	$26,400.00
Office Depreciation	$19,200.00
Advertising	$14,900.00
Ending balance	$60,500.00

Solution 3:

Overapplied overhead = $64,320 - $50,800 = $13,520

Solution 4:

Dobson Manufacturing
Cost of goods manufactured and sold report
Particulars	Amount
Direct materials:
Beginning inventory	$13,800.00
Add: Purchase of direct materials	$94,400.00
Less: Ending inventory of direct material	-$28,800.00
Less: Indirect materials	-$9,500.00
Direct material used	$69,900.00
Direct manufacturing labor	$40,200.00
Manufacturing overhead applied	$64,320.00
Total Current manufacturing cost	$174,420.00
Add: Beginning Work In Process Inventory	$29,400.00
Total Work In Process	$203,820.00
Less: Ending work in process inventory	-$19,200.00
Cost of goods manufactured	$184,620.00
Add: Beginning finished goods inventory	$40,600.00
Cost of goods available for sale	$225,220.00
Less: Ending finished goods inventory	-$48,100.00
Unadjusted cost of goods sold	$177,120.00
Add: Actual overhead	$50,800.00
Less: Overhead applied	-$64,320.00
Adjusted cost of goods sold	$163,600.00

Solution 5:

Dobson Manufacturing
Income Statement
Particulars	Amount
Sales Revenue	$320,000.00
Cost of goods sold	$163,600.00
Gross Profit	$156,400.00
Less: Selling, general and administrative expenses	$60,500.00
Net Operating Income	$95,900.00