Question

Problem 3-25 Schedule of Cost of Goods Manufactured; Overhead Analysis [LO3-1, LO3-2, LO3-3, LO3-6, LO3-7]

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 $109,200 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:

  

Purchase of raw materials	$	130,000
Direct labor cost	$	87,000
Manufacturing overhead costs:
Indirect labor	$	92,100
Property taxes	$	9,000
Depreciation of equipment	$	15,000
Maintenance	$	11,000
Insurance	$	8,000
Rent, building	$	34,000

  

	Beginning		Ending
Raw Materials	$	22,000	$	14,000
Work in Process	$	44,000	$	35,000
Finished Goods	$	69,000	$	62,000

  

Required:
1-a.	Compute the predetermined overhead rate for the year.

       

1-b.	Compute the amount of underapplied or overapplied overhead for the year.

       

2.	Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.

       

3-a.	Compute the unadjusted cost of goods sold for the year. (Do not include any underapplied or overapplied overhead in your cost of goods sold figure.)

       

3-b.	Identify the options available for disposing of underapplied or overapplied overhead? (Select all that apply.)

  

4.	Job 215 was started and completed during the year. What price would have been charged to the customer if the job required $3,400 in direct materials and $4,900 in direct labor cost and the company priced its jobs at 45% above the job’s cost according to the accounting system?

       

5.	Direct materials made up $8,500 of the $35,000 ending Work in Process inventory balance. Supply the information missing below:

       

Answer 1

1-a Predetermined overhead rate = Estimated total manufacturing overhead
Estimated total amount of the allocation base = $109200
$91000 direct labor cost .

1-b Computation of the amount of under applied or over applied overhead for the year:-

1) actual over heads $169100

2) Estimated over heads $109200

3) Under applied overheads =$59900 (2)-(1)

2.cost of goods manufactured for the year is $473,100

3-a. Un-adjusted cost of goods sold for the year $ 480,100

Preparation of schedule of cost of goods sols for the year

Cost Sheet
Particulars	Amount	Amount
Opening stock of raw material	22000
add: purchases	130,000
	152000
less: closing stock of raw matrials	-14000
Raw materials consumed	138000
Wages	87,000
Prime cost		225000
Factory Overheads
Indirect labor	92,100
Property taxes	9,000
Depreciation of equipment	15,000
Maintenance	11,000
Insurance	8,000
Rent, building	34,000	169,100
		394,100
add : opening Work in progress		44000
		438,100
Less closing work in progress		35000
Works cost		473,100
Office & admin Overheads		0
Cost Of Production		473,100
Add: opening Finished Stock		69000
Less: Closing Finished Stock		-62000
Cost Of Goods Sold		480,100

4.

Direct materials	3400
Direct labour	4900
Total cost	8300
Margin @45%on the total cost	3735
Charged to customer	12035