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 $111,600 of manufacturing overhead for an estimated allocation base of $93,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:
Purchase of raw materials | $ | 136,000 |
Direct labor cost | $ | 89,000 |
Manufacturing overhead costs: | ||
Indirect labor | $ | 92,700 |
Property taxes | $ | 8,300 |
Depreciation of equipment | $ | 17,000 |
Maintenance | $ | 11,000 |
Insurance | $ | 11,300 |
Rent, building | $ | 36,000 |
Beginning | Ending | |||
Raw Materials | $ | 22,000 | $ | 14,000 |
Work in Process | $ | 44,000 | $ | 36,000 |
Finished Goods | $ | 70,000 | $ | 57,000 |
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 $36,000 ending balance in Work in Process includes $8,500 of direct materials. Given this assumption, supply the information missing below:
Solution 1:
Predetermined overhead rate = Estimated overhead / Estimated direct material used = $111,600 / $93,000 = 120% of DM cost
Solution 2:
Overhead applied during the period = DM used * 120%
= ($22,000 + $136,000 - $14,000)*120% = $172,800
Actual overhead incurred = 92,700 + $8,300 + $17,000 + $11,000 + $11,300 + $36,000 = $176,300
Underapplied overhead = $176,300 - $172,800 = $3,500
Solution 3:
Gitano Products | ||
Schedule of cost of goods manufactured | ||
Particulars | Amount | |
Direct materials: | ||
Beginning raw material inventory | $22,000.00 | |
Add: Raw material purchases | $136,000.00 | |
Raw materials available | $158,000.00 | |
Less: Ending raw material inventory | $14,000.00 | |
Raw material used in production | $144,000.00 | |
Direct labor | $89,000.00 | |
Applied overhead (120% of DM Cost) | $172,800.00 | |
Total manufacturing costs | $405,800.00 | |
Add: Beginning WIP | $44,000.00 | |
Total cost of work in process | $449,800.00 | |
Less: Ending WIP | $36,000.00 | |
Cost of goods manufactured | $413,800.00 |
Solution 4:
Gitano Products | ||
Schedule of cost of goods sold | ||
Particulars | Amount | |
Beginning finished goods inventory | $70,000.00 | |
Add: Cost of goods manufactured | $413,800.00 | |
Less: Ending finished goods inventory | $57,000.00 | |
Unadjusted Cost of goods sold | $426,800.00 |
Solution 5:
Overhead included in Ending WIP = $8,500*120% = $10,200
Direct labor included in ending WIP = $36,000 - $8,500 - $10,200 = $17,300
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...
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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 $117,000 of manufacturing overhead for an estimated allocation base of $90,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: $ 86,000 Purchase of raw materials Direct...
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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 $121,800 of manufacturing overhead for an estimated allocation base of $87,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials $ 133,000 Direct...
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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 $132,000 of manufacturing overhead for an estimated allocation base of $88,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials $ 140,000 Direct...
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