Question

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 $120,900 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	$	107,400
Property taxes	$	8,400
Depreciation of equipment	$	16,000
Maintenance	$	13,000
Insurance	$	11,100
Rent, building	$	39,000

	Beginning		Ending
Raw Materials	$	29,000	$	18,000
Work in Process	$	49,000	$	36,000
Finished Goods	$	72,000	$	56,000

Required:

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 $8,700 of direct materials. Given this assumption, supply the information missing below:

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

	Gitano Products Schedule of Cost of Goods Manufactured Direct materials: $29,000 136,000 Total raw materials available 165,000 18,000 Raw materials used in production $147,000 89,000 Total manufacturing costs 0 Cost of goods manufactured

4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer.

	Unadjusted cost of goods sold

5.

Assume that the $36,000 ending balance in Work in Process includes $8,700 of direct materials. Given this assumption, supply the information missing below:

	Direct materials Direct labor Manufacturing overhead Work in process inventory $0

Answer 1

Cost of Goods Manufactured Add $ $ $ $ 29,000 136,000 165,000 18,000 less 147,000 Direct Material : Raw Material Inventory Beginning Material purchased Raw material Available for use Ending Inventory of Raw Material Direct Material used Direct Labor Manufacturing Overhead Applied to WIP Total Manufacturing cost Beginning Work in Process Total cost of Work in process Ending Work in Process Cost of Goods Manufactured Add 89,000 191,100 427,100 49,000 476,100 36,000 440,100 less $ $ $ Predetermined Overhead Rate (120900 / 93000) multiply Actual Direct material used Manufacturing Overhead applied $ $ $ 1.30 or 130% 147,000 191,100 4 Unadjusted Cost of Goods sold Add Finished Goods Inventory Beginning Cost of Goods Manufactured Cost of goods available for sale Ending Inventory of Finished Goods Unadjusted Cost Of Goods Sold $ 72,000 $ 440,100 $ 512,100 $ 56,000 $ 456,100 less Direct Material Direct Labor Manufacturing Oh Work in Process inventory 8700 given 15990 11310 36,000 $ Manufacturin OH is 1.3 times direct material = 8700 x 1.3 = 11310 Work in process ending invis 36000 Direct labor = WIP - DM - OH = 36000 - 8700 - 11310 = 15990