Question

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 $131,600 of manufacturing overhead for an estimated allocation base of $94,000 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	$	90,000
Manufacturing overhead costs:
Indirect labor	$	126,700
Property taxes	$	8,500
Depreciation of equipment	$	17,000
Maintenance	$	12,000
Insurance	$	11,000
Rent, building	$	34,000

	Beginning		Ending
Raw Materials	$	24,000	$	17,000
Work in Process	$	48,000	$	39,000
Finished Goods	$	68,000	$	61,000

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 $39,000 ending balance in Work in Process includes $9,000 of direct materials. Given this assumption, supply the information missing below:

Answer 1

Answer 1.
Predetermined Overhead Rate = $131,600 (Estimated Overhead) / $94,000 (Allocation Base - Direct Materials)
Predetermined Overhead Rate = 140% of Direct Material
Answer 2.
Beginning Raw Material	24,000.00
Purchases of raw Material	139,000.00
Raw Material Available	163,000.00
Ending Raw Material	(17,000.00)
Raw Material Used in Production	146,000.00
Manufacturing Overhead Applied = $146,000 X 140%
Manufacturing Overhead Applied = $204,400
Indirect Labor	126,700.00
Property Taxes	8,500.00
Depreciation of Equipment	17,000.00
Maintenance	12,000.00
Insurance	11,000.00
Rent, Building	34,000.00
Total Actual Manufacturing Costs	209,200.00
Total Actual Manufacturing Costs	209,200.00
Manufacturing Overhead, Applied	204,400.00
Underapplied Overhead	4,800.00
Answer 3.
Schedule of Cost of Goods Manufactured
Direct Materials	146,000.00
Direct Labor	90,000.00
Manufacturing Overhead, Applied	204,400.00
Total Manufacturing Costs	440,400.00
Beginning WIP	48,000.00
Sub-total	488,400.00
Ending WIP	(39,000.00)
Cost of Goods Manufactured	449,400.00
Answer 4.
Schedule Of Cost of Goods Sold
Beginning Finished Goods	68,000.00
Cost of Goods Manufactured	449,400.00
Cost of Goods Available for Sale	517,400.00
Ending Finished Goods	(61,000.00)
Unadjusted Cost of Goods Sold	456,400.00