Question

Dobson Manufacturing Company uses a job order cost system with manufacturing overhead applied to products on the basis of direct labor dollars. At the beginning of the most recent period, the company estimated its total direct labor cost to be $51,700 and its total manufacturing overhead cost to be $98,230.

Several incomplete general ledger accounts show the transactions that occurred during the most recent accounting period which is given in second requirement.

Required:

2. Fill in the missing values in the T-accounts.

3. Compute over- or underapplied overhead.

4. Prepare a statement of cost of goods manufactured and sold including the adjustment for over- or underapplied overhead.

5. Prepare a brief income statement for the company.

Fill in the missing values in the T-accounts.

Raw Materials Inventory Work in Process Inventory Beginning Balance 14,800 80,100 Beginning Balance 28,300 Purchases 93,700 Direct Materials 69,000 Ending Balance 28,400 Direct Labor $41,200 Applied Overhead Ending Balance 19,700 Finished Goods Inventory Cost of Goods Sold Beginning Balance 41,900 Unadjusted Cost of Goods Sold Cost of Goods Completed Adjusted Cost of Goods Sold Ending Balance 48,400 Sales Revenue Manufacturing Overhead 315,000 Indirect Materials 11,100 Applied Overhead Indirect Labor 14,300 Factory Depreciation 12,800 Factory Rent 5,300 Factory Utilities 1,200 Other Factory Costs 8,400 Actual Overhead 53,100 Selling, General, and Administrative Expenses Adm. Salaries 26,800 Office Depreciation 19,200 Advertising 14,200 Ending Balance 60,200

Compute over- or underapplied overhead.

	Manufacturing Overhead

Prepare a statement of cost of goods manufactured and sold including the adjustment for over- or underapplied overhead.

DOBSON MANUFACTURING COMPANY Cost of Goods Manufactured and Sold Report Plus: Raw Material Purchases Less: Indirect Material Used Less: Ending Raw Materials Inventory Direct Materials Used in Production Manufacturing Overhead Direct Labor Total Current Manufacturing Costs $0 Plus: Beginning Work in Process Inventory Total Work in Process $0 Less: Ending Work in Process Inventory Cost of Goods Manufactured Plus: Beginning Finished Goods Inventory Cost of Goods Available for Sale $0 Less: Ending Finished Goods Inventory Unadjusted Cost of Goods Sold Adjustment for Overapplied Overhead Adjusted Cost of Goods Sold

Prepare a brief income statement for the company.

	DOBSON MANUFACTURING COMPANY Income Statement    Net Income from Operations

Answer 1

1.
Predetermined Overhead rate = $98230 / 51700 = 190% of Direct Labor Cost

2.
Work in Process Inventory
Applied Overhead = $41200 x 190% = $78280
Cost of Goods Completed = $28300+69000+41200+78280-19700 = $197080

Finished Goods Inventory
Cost of Goods Completed = $197080
Cost of Goods Sold = $197080 + 41900 - 48400 = $190580

Cost of Goods Sold
Unadjusted Cost of Goods Sold = $190580
Adjusted Cost of Goods Sold = $190580-25180 = $165400

3.
Overapplied Overhead = $78280 - 53100 = $25180

4.

Schedule of Cost of Goods manufactured
Direct Materials
Raw Material, Beginning Inventory	$           14,800
Add: Purchases	$           93,700
Deduct : Raw Material in inventory, ending	$          (28,400)
Deduct : Indirect Material	$          (11,100)
Raw Material used in production		$            69,000
Direct Labor		$            41,200
Manufacturing Overhead		$            78,280
Total Manufacturing Costs		$          188,480
Add: Beginning Work in Process Inventory		$            28,300
		$          216,780
Deduct: Ending Work in Process Inventory		$            19,700
Cost of Goods Manufactured		$          197,080
Finished Goods Inventory, Beginning		$            41,900
Cost of Goods Available for sale		$          238,980
Deduct : Finished Goods Inventory, Ending		$            48,400
Unadjusted Cost of goods sold		$          190,580
Overapplied Overhead		$           (25,180)
Adjusted Cost of goods sold		$          165,400

5.

Income Statement
Sales Revenue	$         315,000
Cost of Goods Sold	$         165,400
Gross Profit	$         149,600
Selling and administrative expenses	$           60,200
Net Operating Income	$           89,400