Question

Curtis Inc. uses a job order costing system. Manufacturing overhead is applied on the basis of direct labor cost. Total manufacturing overhead was estimated to be $60,680 for the year; direct labor was estimated to total $151,700.

Raw Materials Inventory

(1/1) $ 10,700

(12/31) $ 13,700

Work in Process Inventory

(1/1) $ 23,900

(12/31) $ 18,500

Finished Goods Inventory

(1/1) $ 34,100

(12/31) $ 40,000

The following transactions have occurred during the year.

Raw materials purchases $ 107,000

Direct materials used $ 96,200

Direct labor $ 147,500

Indirect materials used $ 7,800

Indirect labor $ 15,500

Factory equipment depreciation $ 24,700

Factory rent $ 18,300

Factory utilities $ 8,100

Other factory costs $ 6,800

(a) Calculate the predetermined overhead rate.
(b) Calculate cost of goods manufactured.
(c) Calculate the over- or underapplied overhead. (Input all amounts as positive values.)

(d) Calculate adjusted cost of goods sold.

Answer 1

Answer;
Predetermined overhead rate    =    Total manufacturing Overead / Direct labor cost                                                                                    =   $60,680 / $151,700                                                                                   = 40%
Predetermined overhead rate    =   40%
Calculation of Cost of Goods manufactured
Direct materials:
Direct materials used	$96,200
Direct labor	$147,500
Manufacturing overhead applied ($147,500 x 40%)	$59,000
Add: Beginning Work in process	$23,900
Less: Ending Work in process	($18,500)
Cost of goods manufactured	$308,100
Calculation of the over- or underapplied overhead
Indirect materials used	$7,800
Indirect labor	$15,500
Factory equipment depreciation	$24,700
Factory rent	$18,300
Factory utilities	$8,100
Other factory costs	$6,800
Less: Manufacturing overhead applied	($59,000)
Overhead Underapplied	$22,200
Calculation of the Adjusted Cost of Goods Sold
Cost of goods manufactured	$308,100
Add: Beginning Finished inventory	$34,100
Cost of goods available for sale	$342,200
Less: Ending finished inventory	($40,000)
Cost of Goods Sold	$302,200
Add: Underapplied overhead	$22,200
Adjusted Cost of Goods Sold	$324,400