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 $114,400 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: Purchase of raw materials Direct labor cost Manufacturing overhead costs: $ 140,000 $ 84,000 Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ 119,900 $ 8,700 $ 18,000 $14,000 $ 10,500 $ 34,000 Beginning Ending Raw Materials Work in Process Finished Goods 26,000 $ 46,000 72,000 11,000 39,000 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 $39,000 ending balance in Work in Process includes $8,700 of direct materials. Given this assumption, supply the information missing below

Explanation / Answer

1) predetermined overhead rate Estimated manufacturing overhead/direct materials used 114,400/88000 130.00% answer Direct materials used Beginning raw materials 26,000 Add purchase of raw materials 140,000 Raw materials available for use 166,000 less ending raw materials 11,000 Direct materials used 155,000 Applied overhead 155000*130%= 201500 Actual manufacturing overhead Indirect labor 119,900 property taxes 8,700 Depreciation of Equipment 18,000 Maintenance 14,000 Insurance 10,500 Rent,building 34,000 total actual manufacturing overhead 205,100 205,100 2) overhead under applied 3,600 answer 3) Cost of goods manufactured Direct materials used Beginning raw materials 26,000 Add purchase of raw materials 140,000 Raw materials available for use 166,000 less ending raw materials 11,000 Direct materials used 155,000 Add: Direct labor 84,000 applied manufacturing overhead 201500 total manufacturing cost 440,500 Add:Beginning work in process 46,000 486,500 less Ending work in process 39,000 Cost of goods manufactured for the year 447,500 answer 4) Cost of goods sold beginning finished goods inventory 72,000 Add cost of goods manufactured for the year 447,500 cost of goods available for used 519,500 less ending finished goods inventory 58,000 unadjusted cost of goods sold 461,500 answer under applied or overapplied overhead may be closed directly to cost of goods sold 5) job 415 Direct materials 3,700 direct labor 4,500 overhead applied @140% of direct materials 5180 total manufacturing cost 13,380 pirce of job 13,565*155%= 20739 5) Direct materials 8,700 Direct labor 18,990 manufacturing overhead (140% 0f DM) 11310 Work in process inventory 39,000

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