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 $132.000 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 $ € 138,000 24.000 $ Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building 139.000 2.100 18,000 16.000 11,700 30.000 $ Bax Materials Work in Process Finished Goods Beginning Ending $ 24,000 $11.000 $ 48.000 $ 28.000 $ 74.000 $ 58,000 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 $38.000 ending balance in Work In Process Includes $8.300 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 Compute the predetermined overhead rate for the year. Predetermined overhead rate %

Answer 1

1.

Predetermined overhead rate = Estimated manufacturing overhead / Estimated direct material

Predetermined overhead rate = $132,000/$88,000*100 = 150%

2.

Under or over applied overhead = Applied overhead - Actual overhead

Applied overhead = Direct material used*150%

Applied overhead = ($24,000+138,000-11,000) $151,000*150% = $226,500

Under or over applied overhead = $226,500 - $231,100

Under applied overhead = $4,600

3.

Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials	$24,000
Raw material purchases	138,000
Ending raw materials	(11,000)
Direct material used		$151,000
Direct labor costs		84,000
Manufacturing overhead applied		226,500
Total manufacturing cost		461,500
Beginning work in process		48,000
Ending work in process		(38,000)
Cost of goods manufactured		$471,500

4.

Unadjusted cost of goods sold = Beginning finished goods+Cost of goods manufactured-Ending finished goods

Unadjusted cost of goods sold = $74,000+471,500-58,000 = $487,500

5.

Direct material	$8,300
Direct labor ($38,000-8,300-12,450)	17,250
Manufacturing overhead applied ($8,300*150%)	12,450
Ending work in process	$38,000