Garrett Company makes sailboats. they use normal cost measurement, and accumulat

Question

Garrett Company makes sailboats. they use normal cost measurement, and accumulate product costs costing. The following information is available about their most reacent year.

Garret had no balance in WIP Inventory or Finished Goods Inventory at the beginning of the current year.

During the current year, Garret start 3 jobs. Job 1-01 required $14,000 of direct materials, 2,000 labor hours, and 600 machine hours. Job 4-01 required $25,000 of direct materials, 2,500 labor hours, and 920 machine hours. Job 11-01 is in process at the end of the year. As of the end of the year, Job 11-01 has required $18,000 of direct materials, 850 labor hours, and 220 machine hours.

During the year, $2,650 worth of indirect materials were actually used in production.

Job 1-02 was sold during the current year for a total of $120,000. Job 4-01 has a buyer, but the boat will not actually be sold until next quarter, so Garrett is carrying the cost of the boat in Finished Goods Inventory.

A. Calculate Garrett's pre-determined overhead rate for the accounting period.

B. Journalize the transactions that occurred during the year. Including material purchased, requisition of raw materials, use of direct labor, application of overhead, actual manifacturing overhead, transferof finished goods, sale of boat, and the cost of goods sold.

C. Post the journal entried in B. Calculate the amount of over or under applied overhead.

D. Calculate Garrett's gross margin.

Raw Material, Beginning $800 Raw Material Ending $1,500 Raw Materials Purchased $60,000 Estimate Overhead $90,000 Actual Overhead $91,000 Estimated Machine Hours 1,800 Direct Labor Rate $12 per hour

Explanation / Answer

A)

B)

90000/1800 $50.00 per machine hour

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