Gitano Products operates a job-order costing system and applies overhead cost to

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 $111,800 of manufacturing overhead for an estimated allocation base of $86,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials Direct labor cost Manufacturing overhead costs: $ 136,000 $ 82,000 Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building 114,300 $ 8,600 15,000 $ 11,000 $ 7,000 $ 40,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 27,000 15,000 $ 49,000 40,000 $ 69,000 61,000 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 $40,000 ending balance in Work in Process includes $8,500 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 2Required 3 Required 4 Required 5 Compute the predetermined overhead rate for the year d overhead rate

Explanation / Answer

1) predetermined overhead rate Estimated manufacturing overhead/direct materials used 111800/86000 130.00% answer Direct materials used Beginning raw materials 27,000 Add purchase of raw materials 136,000 Raw materials available for use 163,000 less ending raw materials 15,000 Direct materials used 148,000 Applied overhead 148000*130%= 192400 Actual manufacturing overhead Indirect labor 114,300 property taxes 8,600 Depreciation of Equipment 15,000 Maintenance 11,000 Insurance 7,000 Rent,building 40,000 total actual manufacturing overhead 195,900 195,900 2) overhead under applied 3,500 answer 3) Cost of goods manufactured Direct materials used Beginning raw materials 27,000 Add purchase of raw materials 136,000 Raw materials available for use 163,000 less ending raw materials 15,000 Direct materials used 148,000 Add: Direct labor 82,000 applied manufacturing overhead 192400 total manufacturing cost 422,400 Add:Beginning work in process 49,000 471,400 less Ending work in process 40,000 Cost of goods manufactured for the year 431,400 answer 4) Cost of goods sold beginning finished goods inventory 69,000 Add cost of goods manufactured for the year 431,400 cost of goods available for used 500,400 less ending finished goods inventory 61,000 unadjusted cost of goods sold 439,400 answer 5) Direct materials 8,500 Direct labor 20,450 manufacturing overhead (130% 0f DM) 11050 Work in process inventory 40,000

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