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 $123,200 of manufacturing overhead for an estimated allocation base of $88,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: $ 139,000 $ 84,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ 121,700 $ 8,400 $ 15.000 $ 12,000 $ 10,900 $ 39,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 22,000 $ 16,000 $ 45,000 $ 37,000 $ 68,000 $ 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 $37,000 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

Answer 1

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Answer 1 Predetermined Overhead rate = for the year Estimated manufacturing Overhead / Estimated Allocation base * 100 123,200 / 88,000 * 100 140% = Answer 2 Overhead Applied = - (Beg raw materials + Purchase of Raw materials - Ending raw materials) * Predetermined OH rate (22,000 + 139,000 - 16,000) * 140% 203,000 207,000 Actual Overhead (121,700 + 8,400 + 15,000 + 12,000 + 10,900 + 39,000) Under applied Overhead = $ 4,000 (207,000 - 203,000)

22,000 139,000 161,000 (16,000) Answer 3 Direct material Beginning raw material Raw material purchase Total Raw material available Less: Ending raw material Raw Materials used in production Direct labor Overhead applied Total manufacturing costs Beginning work in process Total cost of work in process Less: Ending work in process Cost of goods manufactured 145,000 84,000 203,000 432,000 45,000 477,000 (37,000) 440,000 Answer 4 Unadjusted Cost of Goods sold = Cost of goods manufactured + Beg Finished Goods - Ending Finished Goods = 440,000 + 68,000 - 60,000 = $ 448,000 Answer 5 Direct material Direct labor (37,000 - 8,500 - 11,900) Manufacturing Overhead (8,500 * 140%) Work in process inventory 8,500 16,600 11,900 37,000