Question

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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 $128,800 of manufacturing overhead for an estimated allocation base of $92,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:         Purchase of raw materials $ 138,000   Direct labor cost $ 88,000   Manufacturing overhead costs:      Indirect labor $ 127,600      Property taxes $ 8,900      Depreciation of equipment $ 16,000      Maintenance $ 12,000      Insurance $ 9,300      Rent, building $ 33,000      Beginning Ending   Raw Materials $ 22,000 $ 15,000   Work in Process $ 46,000 $ 38,000   Finished Goods $ 70,000 $ 58,000 -a. Compute the predetermined overhead rate for the year.         1-b. Compute the amount of underapplied or overapplied overhead for the year.            2-a. Compute the unadjusted cost of goods sold for the year. (Do not include any underapplied or overapplied overhead in your cost of goods sold figure.) Identify the options available for disposing of underapplied or overapplied overhead? (Select all that apply.) Underapplied or overlapied may be allocated among Work in Process, Finished Goods, and Cost of Goods Sold in proportion to the overhead applied Underlapped or Overlapied overhead may be closed directly to Finished Goods Underlapped or overlapied overhead may be allocated between work in Process and Finished Goods Underlapped or overlapied overhead may be allocated between Finished Goods and cost of goods sold in proportion to the overhead applied Underlapped or overlapied overhead may be closed directly to work in process Underlapped or overlapied overhead may be closed directly to cost of goods sold Underlapped or overlapied overhead may be allocated between work in process and cost of goods sold in proportion to the overhead applied

  

3.	Job 215 was started and completed during the year. What price would have been charged to the customer if the job required $3,700 in direct materials and $4,500 in direct labor cost and the company priced its jobs at 55% above the job’s cost according to the accounting system?

       

4.	Direct materials made up $8,700 of the $38,000 ending Work in Process inventory balance. Supply the information missing below:

       

Direct Materials	8,700
Direct Labor
Manufacturing Overhead
Work in Process Inventory	38000

Answer 1

a.	predetermined overhead rate
	Estimated manufacturing overhead/direct materials used
	128,800/92,000
	140.00%
1-b)	Direct materials used
	Beginning raw materials				22,000
	Add purchase of raw materials				138,000
	Raw materials available for use				160,000
	less ending raw materials				15,000
	Direct materials used				145,000
	Applied overhead 145000*140%=					203000
	Actual manufacturing overhead
	Indirect labor				127,600
	property taxes				8,900
	Depreciation of Equipment				16,000
	Maintenance				12,000
	Insurance				9,300
	Rent,building				33,000
	total actual manufacturing overhead				206,800	206,800
	overhead over applied					3,800
2-a)	Unadjusted cost of goods sold for the year
	Direct materials used (refer to above table)					145,000
	Add: Direct labor					88,000
	applied manufacturing overhead					203000
	total manufacturing cost					436,000
	Add:Beginning work in process					46,000
						482,000
	less Ending work in process					38,000
	Cost of goods manufactured for the year					444,000
	Cost of goods sold
	beginning finished goods inventory					70,000
	Add cost of goods manufactured for the year					444,000
	cost of goods available for used					514,000
	less ending finished goods inventory					58,000
	unadjusted cost of goods sold					456,000
	under applied or overapplied overhead may be closed directly to
	cost of goods sold
3)	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
4	Direct materials					8,700
	Direct labor					17,120
	manufacturing overhead (140% 0f DM)					12180
	Work in process inventory					38000