Question

Vanwagenen Inc. uses a job costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor cost. The company has provided the following data for the month of April:

Inventories:

Beginning Ending

Raw materials (all materials are direct materials) ............................... $13,500 $17,500

Work in process……………………………………………...................... $12,000 $16,000

Finished goods………………………………………………..................... $27,000 $25,000

Addition information is given below.

Direct materials used in production..………………………..... $66,000

Total manufacturing costs charged to production (includes direct materials, direct labor, and applied manufacturing overhead)…………………..... $201,000

Manufacturing overhead cost applied to work in process……………………................... $45,000

Manufacturing overhead cost incurred ……………………………………… $60,000

1. The cost of direct materials purchased during April is ______________________________.

2. The cost of goods manufactured for April is _______________________________________.

3. Was overhead over- or under-applied? By how much? _____________________________.

4. The adjusted cost of goods sold (to be reported on income statement) is _________________.

Answer 1

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Answers are highlighted in yellow: Solution: 1) $ Beginning Direct material Add: Purchased during April (66000+17500-13500) Less: Ending Direct Material Direct Material used in production 13500 70,000 -17500 66000 2) Total manufacturing cost charged to production Add: Beginning Work in process Less: Ending Work in process Cost of goods manufactured for April is 201000 12000 - 16000 197000 3) Under-applied by (60000-45000) $ 15,000 Beginning Finished goods Add: Cost of goods manufactured Less: Ending Finished goods Un-adjusted Cost of goods sold Add: under-applied overhead Adjusted cost of goods sold 27000 197000 -25000 199000 15,000 214000 $