The Pacific Manufacturing Compnay operates a job-order system and applies overhe

Question

The Pacific Manufacturing Compnay operates a job-order system and applies overhead cost to jobs on the basis of direct labor costs.  Its predetermoned overhead rate was based on a cost formula that estimated $126,000 of manufacturing overhead for an estimated allocation base of $84, 000 direct labor dollars. The compnay had provided the following data in the form of Excel.

                                                          Beggingin    End

Raw Materials                                 $21,000        16,000

Work in Process                                11,000         10,000

Finished Goods                                 68,000         60,000

The following actual costs were incurred during the year

Purchase of Raw materials (all direct)                    $133,000

Direct:Labor cost                                                              80,000

Manufacturing overhead costs:

Insurance,factory                                                              $7,000

Depreciation of equipment                                             $18,000

Indirect Labor                                                                    $42,000

Property Taxes                                                                  $9,000

Maintenance                                                                      $11,000

Rent, Building                                                                    $36,000

Questions:

#1  Job 137 was started and completed during the year.  What price would have been charged to the customer if the job required $3,200 in materials and $4200 in direct labor cost, and the compnay proced its jobs at 40% above the job's cost according to the accunting system.

#2 Direct Labor made up $8,000 of the $40,00 ending Work in Process incentory balance.  Supply the information missing below:

Direct Materials...............................$  ?

Direct Labor.......................................8,000

Manufacturing overhead....................?

Workm in Process Inventory.......    $40,00

Explanation / Answer

Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials to be used in production (not on the basis of raw materials purchased). All materials are classified as direct materials. In computing a predetermined overhead rate at the beginning of the year, the company's estimates were: manufacturing overhead cost, $800,000; and direct materials to be used in production, $500,000. The company has provided the following data:

Beginning Ending
Raw Materials $20,000 $80,000
Work in Process $150,000 $70,000
Finished Goods $260,000 $400,000

The following actual costs were incurred during the year:


Purchase of raw materials (all direct) $510,000
Direct labor cost $90,000
Manufacturing overhead costs:
Indirect labor $170,000
Property taxes $48,000
Depreciation of equipment $260,000
Maintenance $95,000
Insurance $7,000
Rent, building $180,000

Assuming that what you are looking for is only one of the requirements in this problem, I came up with this solution :)

First, let's solve for the predetermined rate that is:
PREDETERMINED RATE = est. total mfg. cost/ est. DMU
PREDETERMINED RATE = $800,000 / $500,000
PREDETERMINED RATE = $1.60 per Direct Materials Used

Now, let's solve for the applied overhead of Job 215:
APPLIED OVERHEAD = Actual DMU X Predetermined Rate
APPLIED OVERHEAD = $8,500 X 1.60
APPLIED OVERHEAD = $13,600

Finally, to solve for the price that would have been charged for Job 215:
Direct Materials Used = $8,500
Direct Labor = 2,700
Applied Overhead = 13,600
Total Costs = $24,800
Multiply by 125%
JOB 215 SELLING PRICE = $31,000

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