Question

Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $222,840 and total machine hours at 61,900. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job: Direct materials used Direct labor Machine hours Job 101 Job 102 Job 103 Total $10,400 $ 7,900 $5,300 $23,600 $17,300 $ 6,000 $4,700 $28,000 1,300 hours 2,800 hours 900 hours 5,000 hours Job 101 was completed and sold for $50.300. Job 102 was completed but not sold. Job 103 is still in process. Actual overhead costs recorded during the first month of operations totaled $17,200. Required: 1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.) 2. Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations. (Round your intermediate calculations to 2 decimal places.) 3. Compute the balance in the Work in Process Inventory account at the end of the first month. (Round your intermediate calculations to 2 decimal places.) 4. How much gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead? (Round your intermediate calculations to 2 decimal places.) 5-a. Determine the balance in the Manufacturing Overhead account at the end of the first month. (Round your intermediate calculations to 2 decimal places.) 5-b. Is it over- or underapplied?

Answer 1

1)	Predetermined Overhead rate	$ 3.60	per machine hour
2)	Total Applied manufacturing overhead	$ 18,000
3)	Ending work in process inventory	$ 13,240
4)	Gross profit	$ 17,920
5)a	Balance	$ 800
5)b	is it over - or - under applied	over applied

ALL EXPLANATION IS GIVEN BELOW :

REQUIRED :
1)	Calculate the predetermined overhead rate :
	Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total machine hours
	Predetermined overhead rate = $ 222,840 / 61,900 machine hours
	Predetermined overhead rate = $ 3.60 per machine hour
2)	Calculate the Total applied manufacturing overhead :
	Total applied manufacturing overhead = predetermined overhead rate * actual amount of allocation based used
	Total applied manufacturing overhead = $ 3.60 * 5000 machine hours
	Total applied manufacturing overhead = $ 18,000
3)	Calculate the Ending work in process inventory :
	here, Job 103 was the only unfinished job at the end of the first month . The cost associated with the job were
	Ending work in process inventory :
	Direct materials	$ 5,300
	Direct labor	$ 4,700
	Manufacturing overhead(900 hours*3.60)	$ 3,240
	Total work in process cost	$ 13,240
4)	Calculate the Gross profit :
	Here only Job 101 was completed and sold during the period . The cost of job 101 was
	Direct materials	$ 10,400
	Direct labor	$ 17,300
	Manufacturing overhead(1300 hours*3.60)	$ 4,680
	Total cost (cost of goods sold )	$ 32,380
	The gross profit before the adjustment for over or under applied manufacturing is
	sales ( given )	$ 50,300
	less: Cost of goods sold ( above calculation )	($32,380)
	Gross profit	$ 17,920

5)(a)

Calculate the balance in the manufacturing overhead account :

Manufacturing overhead
Actual	$ 17,200	$ 18,000	Applied
(Given)			( see required 2)
Balance	$ 800
(18,000-17,200)

5)(b)	Calculate the over or under applied :
	Applied	$ 18,000
	less: Actual	($ 17,200)
	over applied	$ 800