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 $102,000 of manufacturing overhead for an estimated allocation base of $85,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: points (8 02:35:42 $ $ 135,000 81,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building $ $ $ $ $ $ 99,700 8,400 16,000 15,000 7,200 31,000 eBook Print Raw Materials Work in Process Finished Goods Beginning Ending $ 27,000 $ 18,000 $ 46,000 $ 40,000 $ 73,000 $ 60,000 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 $40,000 ending balance in Work in Process includes $8,200 of direct materials. Given this assumption, supply the information missing below: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute the predetermined overhead rate for the year. Predetermined overhead rate Required 1 Required 2 >

Answer 1

1) Predetermine overhead rate = Manufacturing overhead/Direct material used = 102000/85000 = 120% of direct material used

2) Direct material used = 27000+135000-18000 = 144000

Applied overhead = 144000*1.2 = 172800

Actual overhead = 177300

Under applied overhead = 4500

3) Schedule of cost of goods manufactured

Direct material
Beginning raw material	27000
Raw material purchase	135000
Raw material available for use	162000
Less; Ending raw material	-18000
Direct material used		144000
Direct labor		81000
Manufacturing overhead		172800
Total manufacturing cost		397800
Beginning work in process		46000
Total Cost of work in process		443800
Less: Ending work in process		-40000
Cost of goods manufactured		403800

4) Schedule of cost of goods sold

Beginning finished goods	73000
Cost of goods manufactured	403800
Cost of goods available for sale	476800
Less: Ending finished goods	-60000
Unadjusted cost of goods sold	416800

5) Calculate following

Direct material	8200
Direct labor	21960
Manufacturing overhead (8200*1.2)	9840
Work in process inventory	40000