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 $138,000 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	$	139,000
Direct labor cost	$	88,000
Manufacturing overhead costs:
Indirect labor	$	157,600
Property taxes	$	8,400
Depreciation of equipment	$	18,000
Maintenance	$	11,000
Insurance	$	10,500
Rent, building	$	32,000

	Beginning		Ending
Raw Materials	$	30,000	$	14,000
Work in Process	$	45,000	$	36,000
Finished Goods	$	71,000	$	62,000

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 $36,000 ending balance in Work in Process includes $8,500 of direct materials. Given this assumption, supply the information missing below:

Solutions

Expert Solution

1. Compute the predetermined overhead rate for the year.

=Estimated total manufacturing overhead/Estimated total amount of the allocation

base

=138000/92000=150%

2. Compute the amount of underapplied or overapplied overhead for the year.

Raw materials inventory, beginning	30000
Add, Purchases of raw materia	139000
Raw materials available	169000
Deduct: Raw materials inventory, ending	14000
Raw materials used in production	155000

Actual manufacturing overhead costs:
Indirect labor	157600
Property tax	8400
Depreciation of equipment	18000
Maintenance	11000
Insurance	10500
Rent, building	32000
Total actual cost	237500
Applied manufacturing overhead costs 155000*150%	232500
Underapplied overhead	5000

3. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.

Raw materials inventory, beginning	30000
Add, Purchases of raw materia	139000
Raw materials available	169000
Deduct: Raw materials inventory, ending	14000
Raw materials used in production		155000
Direct labor		88000
Manufacturing overhead applied to work in proces		232500
Total manufacturing cost		475500
Add: Work in process, beginning		45000
Deduct: Work in process, ending		36000
Cost of goods manufactured		484500

4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer.

Fnished goods inventory, beginning	71000
Add: Cost of goods manufactured	484500
Goods available for sale	555500
Deduct: Finished goods inventory, ending	62000
Cost of goods sold	493500

5. Assume that the $36,000 ending balance in Work in Process includes $8,500 of direct materials. Given this assumption, supply the information missing below:

Direct Material	8500
Direct labor (Bal Fig)	14750
Overhead 150% of DM	12750
Work in Progress Given	36000

ekkarill92 answered 1 year ago

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