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 $121,800 of manufacturing overhead for an estimated allocation base of $87,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials	$	134,000
Direct labor cost	$	83,000
Manufacturing overhead costs:
Indirect labor	$	116,700
Property taxes	$	8,300
Depreciation of equipment	$	16,000
Maintenance	$	13,000
Insurance	$	8,700
Rent, building	$	40,000

	Beginning		Ending
Raw Materials	$	21,000	$	13,000
Work in Process	$	44,000	$	36,000
Finished Goods	$	75,000	$	59,000

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 $36,000 ending balance in Work in Process includes $8,600 of direct materials. Given this assumption, supply the information missing below:

Answer 1

1)	predetermined overhead rate
	Estimated manufacturing overhead/direct materials used
	121800/87000
	140.00%	answer
	Direct materials used
	Beginning raw materials				21,000
	Add purchase of raw materials				134,000
	Raw materials available for use				155,000
	less ending raw materials				13,000
	Direct materials used				142,000
	Applied overhead 142000*140%=					198800
	Actual manufacturing overhead
	Indirect labor				116,700
	property taxes				8,300
	Depreciation of Equipment				16,000
	Maintenance				13,000
	Insurance				8,700
	Rent,building				40,000
	total actual manufacturing overhead				202,700	202,700
2)	overhead under applied					3,900	answer
3)	Cost of goods manufactured
	Direct materials used
	Beginning raw materials				21,000
	Add purchase of raw materials				134,000
	Raw materials available for use				155,000
	less ending raw materials				13,000
	Direct materials used					142,000
	Add: Direct labor					83,000
	applied manufacturing overhead					198800
	total manufacturing cost					423,800
	Add:Beginning work in process					44,000
						467,800
	less Ending work in process					36,000
	Cost of goods manufactured for the year					431,800	answer
4)	Cost of goods sold
	beginning finished goods inventory					75,000
	Add cost of goods manufactured for the year					431,800
	cost of goods available for used					506,800
	less ending finished goods inventory					59,000
	unadjusted cost of goods sold					447,800	answer
	under applied or overapplied overhead may be closed directly to
	cost of goods sold

5)	Direct materials					8,600
	Direct labor					15,360
	manufacturing overhead (140% 0f DM)					12040
	Work in process inventory					36,000