Question

In: Accounting

Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis...

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 $120,400 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 $ 139,000

Direct labor cost $ 82,000

Manufacturing overhead costs:

Indirect labor $ 129,200

Property taxes $ 9,000

Depreciation of equipment $ 16,000

Maintenance $ 12,000

Insurance $ 11,700

Rent, building $ 39,000

Beginning Ending
Raw Material $ 27,000 $ 14,000
Work in Process $ 47,000 $ 37,000
Finished Goods $ 68,000 $ 59,000


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 $8,400 of direct materials. Given this assumption, supply the information missing below:

Solutions

Expert Solution

1)
Total estimated manufacturing overheads (a) $120,400
Total estimated Direct materials to be used (b) $86,000
Predetermined overhead rate (a/b*100) 140%
2)
Beginning raw materials $27,000
Add: Purchase of raw materials $139,000
Total cost of raw materials available for use $166,000
Less: Ending raw materials ($14,000)
Direct materials used $152,000
Manufacturing overheads applied ($152,000*140/100) $212,800
Actual manufacturing overheads:
Indirect labor $129,200
Property taxes $9,000
Depreciation of equipment $16,000
Maintenance $12,000
Insurance $11,700
Rent, building $39,000
Total Actual Manufacturing Overhead costs $216,900
The applied manufacturing overheads of $212,800 is less than the actual manufacturing oveheads of $216,900, the overheads are underapplied by $4,100 ($216,900 - $212,800).
Therefore -
Underapplied overheads are $4,100.
3)
Direct materials used $152,000
Direct labor $82,000
Manufacturing overheads $216,900
Total manufacturing costs $450,900
Add: Beginning work in process inventory $47,000
Less: Ending work in process inventory ($37,000)
Cost of goods manufactured $460,900
4)
Cost of goods manufactured $460,900
Add: Beginning Finished goods inventory $68,000
Less: Ending finished goods inventory ($59,000)
Unadjusted cost of goods sold $469,900

The 5th sub part is incomplete as the data given below is missing. Please provide it under comments, i will answer it.


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