Question

Dobson Manufacturing Company uses a job order cost system with manufacturing overhead applied to products on the basis of direct labor dollars. At the beginning of the most recent period, the company estimated its total direct labor cost to be $50,100 and its total manufacturing overhead cost to be $90,180.

Several incomplete general ledger accounts show the transactions that occurred during the most recent accounting period which is given in second requirement.

Required:
1. Calculate the predetermined overhead rate.

	Predetermined Overhead Rate 180 % of Direct Labor Cost sheet is drawn here 2. Fill in the missing values in the T-accounts.

	Raw Materials Inventory Work in Process Inventory Beginning Balance 13,100 78,000 Beginning Balance 28,900 Purchases 93,300 Direct Materials 68,600 Ending Balance 28,400 Direct Labor $ 41,900 Applied Overhead Ending Balance 19,600 Finished Goods Inventory Cost of Goods Sold Beginning Balance 41,300 Unadjusted Cost of Goods Sold Cost of Goods Completed 6,900 Adjusted Cost of Goods Sold Ending Balance 48,200 Sales Revenue Manufacturing Overhead 318,000 Indirect Materials 9,400 Applied Overhead Indirect Labor 14,800 Factory Depreciation 12,400 Factory Rent 5,500 Factory Utilities 2,200 Other Factory Costs 9,900 Actual Overhead 54,200 Selling, General, and Administrative Expenses Adm. Salaries 27,400 Office Depreciation 19,200 Advertising 13,200 Ending Balance 59,800 sheet is drawn here 3. Compute over- or underapplied overhead.

	Manufacturing Overhead sheet is drawn here 4. Prepare a statement of cost of goods manufactured and sold including the adjustment for over- or underapplied overhead.

	DOBSON MANUFACTURING COMPANY Income Statement Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Net Income from Operations

Answer 1

Answer

• Requirement 1 is complete and correct
• Requirement 2

Raw material inventory
Beginning balance	$13,100	$78,000	Raw material used [13100 + 93300 - 28400]
Purchases	$93,300
Ending balance	$28,400
WIP Inventory
Beginning balance	$28,900	$195,220	Cost of Goods completed [28900+68600+41900+75420-19600]
Direct materials	$68,600
Direct Labor	$41,900
Applied Overhead [41900 x 180%]	$75,420
Ending balance	$19,600
Finished Goods Inventory
Beginning balance	$41,300	$188,320	Cost of Goods Sold [41300+195220-48200]
Cost of Goods completed	$195,220
Ending balance	$48,200
Cost of Goods Sold
Unadjusted Cost of Goods Sold	$188,320
Adjusted Cost of Goods Sold [188320 - 21220 over applied]	$167,100
Sales Revenue
	$0	$318,000
Manufacturing Overhead
Indirect materials	$9,400	$75,420	Applied Overhead [41900 x 180%]
Indirect labor	$14,800
Factory Depreciation	$12,400
Factory Rent	$5,500
Factory Utilities	$2,200
Other Factory Costs	$9,900
Actual Overhead	$54,200
Selling, General and Administrative expenses
Adm Salaries	$27,400
Office Depreciation	$19,200
Advertising	$13,200
Ending balance	$59,800

• Requirement 3

Applied Overheads	$75,420
Actual Overheads	$54,200
Manufacturing Overheads are	OVER APPLIED, because Applied overheads are MORE than actual overhead
OVER - APPLIED by	$21,220

• Requirement 4

Cost of Goods manufacturing & Sold Report
Beginning Raw material Inventory	$13,100
Add: Raw material purchases	$93,300
Less: Ending raw material inventory	$28,400
Less: Indirect material	$9,400
Direct Materials used in production	$68,600
Direct Labor	$41,900
Manufacturing Overhead	$75,420
Total Current Manufacturing costs	$185,920
Add: Beginning WIP Inventory	$28,900
Total WIP	$214,820
Less: Ending WIP Inventory	$19,600
Cost of Goods manufactured	$195,220
Add: Beginning finished goods inventory	$41,300
Cost of goods available for sale	$236,520
Less: Ending finished goods inventory	$48,200
Unadjusted Cost of Goods Sold	$188,320
Less: Overapplied manufacturing overhead	$21,220
Adjusted Cost of Goods Sold	$167,100

• Requirement 5

DOBSON MANUFACTURING COMPANY
Income Statement
Sales Revenue	$318,000
Cost of Goods Sold	$167,100
Gross Profit	$150,900
Selling, General, and Administrative Expenses	$59,800
Net Income from Operations	$91,100