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 $120,400 of manufacturing overhead for an estimated allocation base of $86,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

         
Purchase of raw materials   $   138,000
Direct labor cost   $   82,000
Manufacturing overhead costs:        
Indirect labor   $   136,500
Property taxes   $   8,400
Depreciation of equipment   $   16,000
Maintenance   $   14,000
Insurance   $   7,600
Rent, building   $   31,000

    Beginning   Ending
Raw Materials   $   22,000   $   11,000
Work in Process   $   45,000   $   37,000
Finished Goods   $   74,000   $   59,000

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 $37,000 ending balance in Work in Process includes $8,100 of direct materials. Given this assumption, supply the information missing below:

Answer 1

Answers 102 predelirmine overhead male's =$120.400X100/$ 86000 1 - 140% of direct materialy used Actual Overhead = $ 213,500 We have to tool all the items in the Manufacturing overhead colty) Direct Material used = 120007138,000 - 11000 = 149000 Applied overhead = 149000 x140% = 208,600 under applied overhead = 208,600- 2/3,500 74,900 24,000 Direct material Beginning raw material Purchase 139000 Less: Ending raw material -11000 Direct material used 149000 Direct labor 82000 Manufacturing overhead 208,600 439,600 total Hanufacturing cost Beginning work in process 45000 Total cost of work in process 484600 Less'. Ending work in proces -37000 Cost of goods manufactured 447,600 (4) amadjusted cost of goody sold = 74000+447,600-59000 = 462,600 (5) Missing amount Ending balance in work in process 37000 Diveet Material 81.00 overhead (8100 x 140%) 1/340 Direct labor (37000-8100.--11340) | 17,560