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 $127,400 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 $ $ 131,000 87,600 eBook Purchase of raw materials Direct labor cost Manufacturing overhead costs Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ $ $ $ $ 119,400 8.400 16,000 11,000 11,200 39.00 $ Raw Materials work is process Finished Goods Beginning $ 23,000 $ 47.000 72.000 Ending 10,000 39.000 58.000 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 vear Assume all raw materials are used in production as direct materials

Answer 1

1) Predetermined Overhead Rate :-

= Estimated Manufacturing Overhead / Estimated Direct Materials Cost

= $127400 / $91000

= 140%

2) Underapplied or Overapplied Overhead :-

= Manufacturing Overhead Incurred - Manufacturing Overhead Applied

= $205000 - $201600

= 3400 Underapplied Overhead

Manufacturing Overhead Incurred ;-

= Indirect Labor+Property Taxes+Depreciation on Equipment+Maintenance+Insurance+Rent

= $119400+$8400+$16000+$11000+$11200+$39000

= $205000

Manufacturing Overhead Applied :-

= Direct Materials Used in Production * Predetermined Overhead Rate

= $144000 * 140%

= $201600

Direct Materials Used in Production :-

= Beginning Raw Materials + Purchase of Raw Materials - Ending Raw Material

= $23000 + $131000 - $10000

= $144000

3) Cost of Goods Manufactured :-

Particulars	Amount($)	Amount($)
Direct Materials
Raw materials, Beginning Balance	23000
Add : Purchase of Raw Materials	131000
Total Raw Materials Available	154000
Less : Raw Materials Ending Balance	(10000)
Raw Materials Used in Production	144000	144000
Add : Direct Labor Cost		87000
Add : Manufacturing Overhead applied ($144000*140%)		201600
Total Manufacturing Cost		432600
Add : Work in Process- Beginning		47000
Less: Work in Process - Ending		(39000)
Cost of Goods Manufactured		440600

4) Unadjusted Cost of Goods Sold :-

Particulars	Amount($)
Cost of Goods Sold	440600
Add : Finished Goods - Beginning Balance	72000
Cost of Goods available for Sale	512600
Less : Finished Goods - Ending Balance	(58000)
Unadjusted Cost of Goods sold	454600

5)

Particulars	Amount($)
Direct Materials	8500
Direct Labor ($39000-$8500-$11900)	18600
Manufacturing Overhead ($8500*140%)	11900
Work in Process Inventory	39000