Question

g. On January 1, the company's inventory balances were as follow Subm Raw materials Work in process Finished goods $50,500 $25,000 $38,100 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company's predetermined overhead rate was based on a cost formula that estimated $470,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year: a. Raw materials were purchased on account, $592,000. b. Raw materials used in production, $557,000. All of of the raw materials were used as direct materials c. The following costs were accrued for employee services: direct labor, $442,000; indirect labor, $150,000, selling and administrative salaries, $295,000 d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing. $381,000 e. Incurred various manufacturing overhead costs (eg, depreciation, insurance, and utilities), $320,000 f. Manufacturing overhead cost was applied to production. The company actually worked 41000 direct labor-hours on all jobs during the year. g. Jobs costing $1,399,450 to manufacture according to their job cost sheets were completed during the year h. Jobs were sold on account to customers during the year for a total of $2,901,500. The jobs cost $1,409.000 to manufacture according to their job cost sheets. The company closes any over- or under-applied manufacturing overhead to Cost of Goods Sold What is the gross margin for the year? (All answers are whole numbers -- unless specified otherwise. You should NOT include the S sign or a comma Eg you should be 1000 for one thousand. Negative numbers should be added with a minus signe 9.-1000 for a decrease or loss of one thousand)

Answer 1

OH rate per DLH
Estimated Overheads			4,70,000
Divide: Estimated DLH			40,000
OH rate per DLH			11.75
Under/Over-applied Overheads
Overheads incurred
Indirect labour		1,50,000
Mfg Overheads cost		3,20,000
Overheads incurred			4,70,000
Overheads applied (41,000 DLH @ 11.75)	481750
Over-applied Overheads		11750
Computation of Adjusted Cost of goods sold
Cost of goods sold -unadjusted		14,09,000
Less: Over-applied overheads		-11750
Adjusted Cost of goods sold		13,97,250
Gross Profit:
Sales revenue			29,01,500
Less: Adjusted cost of goods sold		13,97,250
Gross Profit:			15,04,250
Answer is $ 1504,250