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 $119.600 of manufacturing overhead for an estimated allocation base of $92,000 direct material dollars to be used in production. The company has provided the following data for the just completed year, $ 131,000 $ 88,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ 102,100 $ 8,100 $ 18,000 $ 13,000 $ 7,000 $ 37,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 24,000 $ 16,000 $ 46,000$ 37,000 $ 74,000 561,000

Answer 1

Solution 1:
Predetermined overhead rate
Estimated Manufacturing overhead	119600
/Estimated direct material used	92000
Predetermined overhead rate	130%

Solution 2:
Dierct materials used
Raw Material, Beginning	$24,000
Add: Purchase of Raw Material	$1,31,000
Less: Raw Material, Ending	$16,000
Direct material used in production	$1,39,000
Underapplied or overapplied overhead
Applied overhead ($139000*130%)		$1,80,700
Actual Overhead:
Indirect labor	102100
Property taxes	8100
Depreciation of Equipment	18000
Maintenance	13000
Insurance	7000
Rent Building	37000
Total Actual Overhead costs		$1,85,200
Under applied Overhead		$4,500

Solution 3:
Gitano Products
Schedule of cost of goods manufactured
Direct Material:
Raw Material, Beginning	$24,000
Add: Purchase of Raw Material	$1,31,000
Total Raw material available	$1,55,000
Less: Raw Material, Ending	$16,000
Raw material used in production		$1,39,000
Direct Labor cost		$88,000
Applied Manufacturing Overhead		$1,80,700
Total Manufacturing Costs		$4,07,700
Add: Work in Process, Beginning		$46,000
Subtotal		$4,53,700
Less: Work in Process, Ending		$37,000
Cost of goods manufactured		$4,16,700

Solution 4:
Gitano Products
Computation of Unadjusted cost of goods sold
Cost of goods manufactured	$4,16,700
Add: Finished Goods, Beginning	$74,000
Total Goods available for sale	$4,90,700
Less: Finished Goods, Ending	$61,000
Unadjusted Cost of goods Sold	$4,29,700

Solution 5:
Direct materials	8900
Manufacturing overhead (8900*130%)	11570
Direct Labor (37000- 8900- 11570)	16530
Total ending balance in Work in Process	37000