Question

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 $57,800 and its total manufacturing overhead cost to be $92,480. 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. 2. Fill in the missing values in the T-accounts. 3. Compute over- or underapplied overhead. 4. Prepare a statement of cost of goods manufactured and sold including the adjustment for over- or underapplied overhead. 5. Prepare a brief income statement for the company. Complete this question by entering your answers in the tabs below. Required 5 Required 3 Required 4 Required 1 Required 2 Calculate the predetermined overhead rate. % of Direct Labor Cost Predetermined Overhead Rate

Answer 1

1) Predetermined overhead rate= Estimated manufacturing overhead cost/Estimated direct labor hour

= $92480*100/57800= 160% of direct labor cost

2) Applied overhead= $41500*160%= $66400

Raw Materials Inventory					Work in Process Inventory
Beginning balance	$13000	77400 (13000+93400-29000)			Beginning balance	$29900	187700	(29900+68700+41500+66400-18800)
Purchases	93400				Direct materials	68700
Ending balance	29000				Direct labor	41500
					Applied overhead	66400
					Ending balance	18800
Finished Goods Inventory					Cost of Goods Sold
Beginning balance	$40400	179600 (40400+187700-48500)			Unadjusted cost of goods sold	179600
Cost of goods completed	187700				Cost of goods sold	163100 (179600-16500)
Ending balance	48500
Sales Revenue					Manufacturing Overhead
		314000			Indirect materials	8700	66400	Applied Overhead
					Indirect labor	13100
					Factory depreciation	11900
					Factory rent	5700
					Factory utilities	2100
					Other factory costs	8400
					Actual overhead	49900
Selling, General & Administrative Expenses
Adm. salaries	26900
Office depreciation	19600
Advertising	14600
Ending balance	61100

3) Over or underapplied overhead= Actual manufacturing costs-Applied overhead

= $49900-66400= $16500 overapplied

4)

Dobson Manufacturing
Cost of Goods Manufactured and Sold
Beginning raw materials inventory	$13000
Add: Purchases of raw materials	93400
Less: Indirect materials used (77400-68700)	-8700
Less: Ending raw materials inventory	-29000
Direct materials used	68700
Direct labor	41500
Manufacturing overhead applied	66400
Total manufacturing costs	$176600
Add: Beginning Work-in process inventory	29900
Total work-in process	206500
Less: Ending Work-in process inventory	-18800
Cost of goods manufactured	187700
Add; Beginning finished goods inventory	40400
Total cost of goods available for sale	228100
Less: Ending finished goods inventory	-48500
Unadjusted cost of goods sold	179600
Less: Overapplied overhead	-16500
Adjusted cost of goods sold	$163100

5)

Dobson Manufacturing
Income Statement
Sales revenue	$314000
Less: Adjusted cost of goods sold	-163100
Gross profit	150900
Less: Selling, General & Administrative Expenses	-61100
Income from operations	$89800