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Problem 3-14 Schedule of Cost of Goods Manufactured; Overhead Analysis [LO3-3, LO3-4] Gitano Products operates a...

Problem 3-14 Schedule of Cost of Goods Manufactured; Overhead Analysis [LO3-3, LO3-4]

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 $135,000 of manufacturing overhead for an estimated allocation base of $90,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials $ 132,000
Direct labor cost $ 86,000
Manufacturing overhead costs:
Indirect labor $ 145,200
Property taxes $ 8,400
Depreciation of equipment $ 18,000
Maintenance $ 13,000
Insurance $ 8,000
Rent, building $ 34,000
Beginning Ending
Raw Materials $ 27,000 $ 11,000
Work in Process $ 49,000 $ 37,000
Finished Goods $ 68,000 $ 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 $37,000 ending balance in Work in Process includes $8,500 of direct materials. Given this assumption, supply the information missing below:

Solutions

Expert Solution

1 ) Predetermine overhead rate = 135000 * 100 / 90000 = 150%

2) The amount of underapplied or overapplied overhead for the year

Working :

Raw material used = Beginning raw materials + Raw material purchases - Ending raw materials

Raw material used = 27000 + 132000 - 11000

Raw material used = 148000

Applied overhead = 148000 * 150% = 222000

Actual Overhead = 145200 + 8400 + 18000 + 13000 + 8000 + 34000

Actual Overhead = 226600

Underapplied overhead = 226600 - 222000 = 4600

3)

Schedule of cost of goods manufactured
Direct material used Amount ($) Amount ($)
Beginning raw material 27000
Raw material purchase 132000
Raw material available for use 159000
Less: Ending raw material -11000
Direct material used 148000
Direct labor 86000
Manufacturing overhead 222000
Total manufacturing cost 456000
Beginning work in process 49000
Total cost of work in process 505000
Less: Ending work in process -37000
Cost of goods manufactured 468000

4) Unadjusted cost of goods sold = 68000 + 468000 - 58000

Unadjusted cost of goods sold = 478000

5) Ending WIP = $  37000

Applied overhead = $ 8500 * 150% = 12750

Direct labor = 37000 - 8500 - 12750 = $ 15750

ekkarill92 answered 2 years ago
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