Question

Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $246,800 and total machine hours at 61,700. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:

	Job 101			Job 102			Job 103			Total
Direct materials used	$	11,300		$	8,500		$	5,500		$	25,300
Direct labor	$	16,600		$	5,100		$	4,300		$	26,000
Machine hours		1,700	hours		2,700	hours		500	hours		4,900	hours

Job 101 was completed and sold for $51,900.
Job 102 was completed but not sold.
Job 103 is still in process.

Actual overhead costs recorded during the first month of operations totaled $18,900.

Required:
1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)

2. Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations. (Round your intermediate calculations to 2 decimal places.)

3. Compute the balance in the Work in Process Inventory account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)

4. How much gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead? (Round your intermediate calculations to 2 decimal places.)

5-a. Determine the balance in the Manufacturing Overhead account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)

5-b. Is it over- or underapplied?

Answer 1

1)Calculate pre determined OVERHEAD rate

Pre determined OVERHEAD rate =total Manufacturing OVERHEAD cost/total machine hours

= $246800/61700

= $4 per machine hour

2) Compute the to manufacturing overhead appiled to the work in process inventory

total manufacturing overhead appiled = total machine hours × per hour

= 4900×$4 = $19600

3) Compute balance in work in process inventory at the end of the first month

Ending work in process inventory (job103) =($5500+$4300+(500×$4) = $11800

4) gross profit to be reported for the first month of operations before making adjustments of over and underapplied

cost of job 101 =( $11300+$16600+$1700×$4)= $34700

Because only one job is sold that is job 101therefore

Gross profit before adjusting under or over applied

Job 101 = $51900 - $34700 = $17200

5) a) manufacturing overhead Account

Actual	$18900	appiled	$19600
Under appiled	$700

5b) it is under appiled overhead $700

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