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 $113,100 of manufacturing overhead for an estimated allocation base of $87,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials $ 139,000 Direct labor cost $ 83,000 Manufacturing overhead costs: Indirect labor $ 108,600 Property taxes $ 8,100 Depreciation of equipment $ 19,000 Maintenance $ 13,000 Insurance $ 9,200 Rent, building $ 35,000 Beginning Ending Raw Materials $ 23,000 $ 16,000 Work in Process $ 45,000 $ 36,000 Finished Goods $ 71,000 $ 61,000

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 $8,200 of direct materials. Given this assumption, supply the information missing below:

Answer 1

1. Predetermined overhead rate for the year = Estimated manufacturing overhead/Estimated direct materials used = $113100/$87000 = 130% of direct materials used in production

2. Underapplied overheads: $3100

Manufacturing overheads applied:

Raw materials used = Beginning balance + Purchases - Ending balance = $23000 + $139000 - $16000 = $146000

Manufacturing overhead applied = $146000 x 130% = $189800

Manufacturing overheads incurred:
Indirect labor	108600
Property taxes	8100
Depreciation of equipment	19000
Maintenance	13000
Insurance	9200
Rent, building	35000
Total overheads incurred $	192900

Manufacturing overheads incurred	192900
Manufacturing overheads applied	189800
Overheads underapplied $	3100

3.

Gitano Products
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	23000
Add: Purchases of raw materials	139000
Total raw materials available	162000
Less: Ending raw materials inventory	16000
Direct Materials used in production		146000
Direct labor		83000
Manufacturing overheads		189800
Total manufacturing costs incurred during the year		418800
Add: Beginning work in process inventory		45000
Total manufacturing costs		463800
Less: Ending work in process inventory		36000
Cost of goods manufactured $		427800

4.

Gitano Products
Schedule of Cost of Goods Sold
Cost of goods manufactured $	427800
Add: Beginning finished goods inventory	71000
Cost of goods available for sale	498800
Less: Ending finished goods inventory	61000
Unadjusted Cost of goods sold $	437800

Note: Per HOMEWORKLIB RULES, the first 4 sub-parts have been answered. Also, sub-part 5 is incomplete hence cannot be answered. Kindly post the same separately. Thank you.