Question

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 $124,600 of manufacturing overhead for an estimated allocation base of $89,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

   

Purchase of raw materials$130,000

Direct labor cost$85,000

Manufacturing overhead costs:  

Indirect labor$115,100

Property taxes$9,000

Depreciation of equipment$19,000

Maintenance$11,000

Insurance$9,700

Rent, building$34,000

BeginningEnding

Raw Materials$25,000$17,000

Work in Process$47,000$36,000

Finished Goods$75,000$58,000

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 $36,000 ending balance in Work in Process includes $8,400 of direct materials. Given this assumption, supply the information missing below:

Answer 1