Normal costing, overhead allocation, working backward. Gardi Manufacturing uses

Question

Normal costing, overhead allocation, working backward. Gardi Manufacturing uses normal costing for its job-costing system, which has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost category (manufacturing overhead). The following information is obtained for 2017:

· Total manufacturing costs, $8,300,000

· Manufacturing overhead allocated, $4,100,000 (allocated at a rate of 250% of direct manufacturing labor costs)

· Work-in-process inventory on January 1, 2017, $420,000

· Cost of finished goods manufactured, $8,100,000

Required:

1.   Use information in the first two bullet points to calculate (a) direct manufacturing labor costs in 2017 and (b) cost of direct materials used in 2017.

2.   Calculate the ending work-in-process inventory on December 31, 2017.

Explanation / Answer

1) Direct manufacturing labor costs = Manufacturing overhead allocated / allocation at a rate = $4100000/250% = $1640000 Cost of direct materials used = Total manufacturing costs - direct manufacturing labor costs - Manufacturing overhead allocated = $8300000-$1640000-$4100000 = $2560000 2) Ending work-in-process inventory on December 31, 2017 = Work-in-process inventory on January 1, 2017 + Total manufacturing costs - Cost of finished goods manufactured = $420000+$8300000-$8100000 = $620000

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