Question

Dobson Manufacturing Company uses a job order cost system with manufacturing overhead applied to products on the basis of direct labor dolars. At the beginning of the most recent direct labor cost to be $65,000 and its total manufacturing overhead cost to be $91,000 Several incomplete general ledger accounts show the transactions that occurred during the most recent accounting perlod which is given in second requirement. Required: 1. Calculate the predetermined overhead rate Rate ost 2. Fill in the missing values in the T-accounts. Work in Process Inventory Beginning Balance 15,000 95,000 30,000 Beginning Balance Direct Materials Direct Labor Applied Overhead Ending Balance 30,000 7D,000 S 50,000 Ending Balance 20,000 Goods l Cost of Goods Sold Beginning Balance 40.000 Unadjusted Cost of Goods Sold of Goods Complated Cost of Goods Sold Ending Balance 50,000

Answer 1

Answer

• Requirements asked: 1, 2 and 3
• Requirement 1

Total manufacturing Overhead	$                     91,000
Direct labor cost	$                     65,000
Predetermined Overhead rate	140%

• Requirement 2

Raw material inventory
Beginning balance	$15,000	$80,000	Raw material used [15000 + 95000 -30000]
Purchases	$95,000
Ending balance	$30,000
WIP Inventory
Beginning balance	$30,000	$200,000	Cost of Goods completed [30000 + 70000 + 50000 + 70000 - 20000]
Direct materials	$70,000
Direct Labor	$50,000
Applied Overhead [50000 x 140%]	$70,000
Ending balance	$20,000
Finished Goods Inventory
Beginning balance	$40,000	$190,000	Cost of Goods Sold [40000 + 200000 - 50000]
Cost of Goods completed	$200,000
Ending balance	$50,000
Cost of Goods Sold
Unadjusted Cost of Goods Sold	$190,000
Adjusted Cost of Goods Sold [190000 - 12000 over applied]	$178,000
Sales Revenue
	$0	$300,000
Manufacturing Overhead
Indirect materials	$10,000	$70,000	Applied Overhead [50000 x 140%]
Indirect labor	$15,000
Factory Depreciation	$13,000
Factory Rent	$7,000
Factory Utilities	$3,000
Other Factory Costs	$10,000
Actual Overhead	$58,000
Selling, General and Administrative expenses
Adm Salaries	$28,000
Office Depreciation	$20,000
Advertising	$15,000
Ending balance	$63,000

• Requirement 3

Applied Overheads	$70,000
Actual Overheads	$58,000
Manufacturing Overheads are	OVER APPLIED, because Applied overheads are MORE than actual overhead
Answer: OVER - APPLIED by	$12,000