Question

Chech 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 $136,500 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: $ $ 134,aca 87,90 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ $ $ $ $ $ 142, 129 8,888 29, eee 13, aea 8.789 31.aea Raw Materials Work in Process Finished Goods Beginning $ 23,eee $ 48,000 $ 75,eee Ending $ 11, $ 39,080 $ 60,000 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 $39,000 ending balance in Work in Process includes $8,500 of direct materials. Given this assumption, supply the information missing below: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute the predetermined overhead rate for the year. Predetermined overhead rate % Required 1 Required 2 >

Answer 1

1 Predetermine overhead rate = 136500/91000 = 150% of material cost

2) Applied overhead = (23000+134000-11000)*1.5 = 219000

Actual overhead = 223600

Under applied overhead = 223600-219000 = 4600

3) Schedule of cost of goods manufactured

Direct material used
Beginning raw material	23000
Raw material purchase	134000
Raw material available for use	157000
Less: Ending raw material	-11000
Direct material used		146000
Direct labor		87000
Manufacturing overhead		219000
Total manufacturing cost		452000
Beginning work in process		48000
Total cost of work in process		500000
Less: Ending work in process		-39000
Cost of goods manufactured		461000

4) Unadjusted cost of goods sold = 75000+461000-60000 = 476000

5) Ending work in process = 39000

Direct material = 8500

Applied overhead = 8500*1.5 = 12750

Direct labor = 39000-21250 = 17750