Question

production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $111,600 of manufacturing overhead for an estimated allocation base of $93,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: $ 132,000 $ 89,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ $ $ $ $ $ 95,600 8,700 18,000 12,000 10, 200 30,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 24,000 $ 14,000 $ 49,000 $ 36,000 $ 71,000 $ 58,000 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 $36,000 ending balance in Work in Process includes $8,400 of direct materials. Given this assumption, supply the information missing below:

Answer 1

Company 7 Requirement 1 Predetermined overhead rate = Estimated total manufacturing overhead cost Estimated total amount of the allocation base 111600 / 93000 120% of direct labor cost Predetermined overhead rate = Predetermined overhead rate = Requirement 2 Actual manufacturing overhead costs: Insurance, factory Depreciation of equipment Indirect labor Property taxes Maintenance Rent, building Total actual costs Applied manufacturing overhead costs:$89,000 x 120% Underapplied overhead 10200 18000 95600 8700 12000 30000 174500 106800 67700 Requirement 3 Schedule of Cost of Goods Manufactured Direct materials: Raw materials inventory, beginning Add: Purchases of raw materials Total raw materials available Deduct: Raw materials inventory, ending Raw materials used in production Direct labor Manufacturing overhead applied to work in process Total manufacturing cost Add: Work in process, beginning 24000 132000 156000 - 14000 142000 89000 106800 337800 49000 386800 -36000 Deduct: Work in process, ending Cost of goods manufactured 350800 Requirement 4 Unadjusted cost of goods sold: Finished goods inventory, beginning Add: Cost of goods manufactured Cost of goods available for sale Deduct: Finished goods inventory, ending Unadjusted cost of goods sold 71000 350800 421800 -58000 363800 Requirement 5 The amount of direct materials cost in Work in Process was: 36000 Total ending work in process Deduct: Direct materials Direct labor + Manufacturing overhead -8400 27600 X + 120% X = 27600 2.20X = 27600 ; X = 12545 Direct Labor = 12545; Manufacturing overhead = 12545 x 120% = 15055