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 $118,300 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 $140,000 Direct labor cost $ 87,000 Manufacturing overhead costs: Indirect labor $114,700 Property taxes $ 8,800 Depreciation of $ 17,000 equipment Maintenance $ 13,000 Insurance $ 11,100 Rent, building $ 36,000 Beginning Ending Raw Materials $ 25,000 $14,000 Work in $ 48,000 $38,000 Process Finished $ 73,000 $56,000 Goods 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 $38,000 ending balance in Work in Process includes $8,900 of direct materials. Given this assumption, supply the information missing below:

Answer 1

1) Predetermine overhead = 118300/91000 = 130% of direct material used

2) Direct material used = 25000+140000-14000 = 151000

Applied overhead = 151000*1.3 = 196300

Actual overhead = 200500

Under applied overhead = 200500-196300 = 4200

3) Schedule of cost of goods manufactured

Direct material
Beginning material	25000
Material purchase	140000
Material available for use	165000
Less: Ending material	-14000
Direct material used		151000
Direct labor		87000
Manufacturing overhead applied		196300
Total manufacturing cost		434300
Beginning work in process		48000
Total cost of work in process		482300
Less; Ending work in process		-38000
Cost of goods manufactured		444300

4) Schedule of cost of goods sold

Beginning finished goods	73000
Cost of goods manufactured	444300
Cost of goods available for sale	517300
Less; Ending finished goods	-56000
Unadjusted cost of goods sold	461300

5) Calculate following

Direct material	8900
Direct labor	17530
manufacturing overhead (8900*1.30)	11570
Work in process inventory	38000