Question

Problem 3-14 Schedule of Cost of Goods Manufactured; Overhead Analysis (LO3-3, LO3-4) 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 $127,400 of manufacturing overhead for an estimated allocation base of $91.000 direct material dollars to be used in production. The company has provided the following data for the just completed year $ $ 135,eee 87,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect latior Property taxes Depreciation of equipment Maintenance Insarace Rent, building $ 115,700 $ 8,300 $ 18,000 $ 15,000 $ 9,200 $ 36,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 24,000 $ 17, eee $ 45,000 $ 37,eee $ 72,000 $ 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 $8,800 of direct materials. Given this assumption, supply the information missing below:

Answer 1

1)Overhead rate =Estimated overhead cost /estimated direct material cost

                = 127400 /91000

                  = 1.40 or 140% of direct material cost

2)

Total of all actual overhead cost :115700+8300+18000+15000+9200+36000=202200

Raw material used :Beginning raw material + purchase -ending raw material balance

                 = 24000+135000-17000

                 = 142000

Overhead applied =Actual raw material used* overhead rate

                  = 142000*140%

                    = 198800

Overhead under-applied/ (Over-applied) =Actual overhead- applied overhead

                              = 202200 - 198800

                             = 3400

3)

SCHEDULE OF COST OF GOODS MANUFACTURED
Beginning raw material inventory	24000
Add:raw material purchased	135000
Raw material available for use	159000
less:ending raw material inventory	-17000
Raw material used	142000
Direct labor cost	87000
Overhead applied	198800
Total manufacturing cost incurred	427800
Add:beginning work in process	45000
	472800
less:ending work in process	-37000
cost of goods manufactured	435800

4)

Cost of goods sold (un-adjusted ) =Beginning finished goods inventory +cost of goods manufactured- ending finished goods inventory

        = 72000+435800 -59000

          = 448800