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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 $123,200 of manufacturing overhead for an estimated allocation base of $88,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials $ 131,000
Direct labor cost $ 84,000
Manufacturing overhead costs:
Indirect labor $ 131,000
Property taxes $ 8,000
Depreciation of equipment $ 20,000
Maintenance $ 14,000
Insurance $ 7,800
Rent, building $ 31,000
Beginning Ending
Raw Materials $ 29,000 $ 11,000
Work in Process $ 50,000 $ 37,000
Finished Goods $ 70,000 $ 57,000

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 $8,200 of direct materials. Given this assumption, supply the information missing below:

Solutions

Expert Solution

1) Predetermine overhead rate = 123200*100/88000 = 140% of direct material used

2) Actual overhead = 211800

Direct material used = 29000+130000-11000 = 149000

Applied overhead = 149000*140% = 208600

Under applied overhead = 208600-211800 = 3200

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

Direct material
Beginning raw material 29000
Purchase 131000
Less: Ending raw material -11000
Direct material used 149000
Direct labour 84000
Manufacturing overhead ( 208600
Total manufacturing cost 441600
Beginning work in process 50000
Total cost of work in process 491600
Less: Ending work in process -37000
Cost of goods manufactured 454600

4) unadjusted cost of goods sold = 70000+454600-57000 = 467600

5) Missing amount

Ending balance in work in process 37000
Direct material 8200
Overhead (8200*140%) 11480
Direct labour (37000-8200-11480) 17320

ekkarill92 answered 2 years ago
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