Question

Tancredi Corporation has two manufacturing departments--Machining and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

	Molding		Customizing		Total
Estimated total machine-hours (MHs)		5,000		5,000		10,000
Estimated total fixed manufacturing overhead cost	$	22,000	$	11,500	$	33,500
Estimated variable manufacturing overhead cost per MH	$	1.80	$	3.00

During the most recent month, the company started and completed two jobs--Job E and Job J. There were no beginning inventories. Data concerning those two jobs follow:

	Job E		Job J
Direct materials	$	12,800	$	7,000
Direct labor cost	$	17,600	$	7,700
Machining machine-hours		3,400		1,600
Customizing machine-hours		2,000		3,000

Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. If both jobs are sold during the month, the company's cost of goods sold for the month would be closest to:

A. $102,600

B. $110,808

C. $41,150

D. $61,450

Answer 1

A.$102,600.

first let us calculate the predetermined overhead rate:

total fixed manufacturing cost	$33,500
total variable manufacturing cost ($1.80*5,000) +(3*5,000)	24,000
total manufacturing overhead	$57,500
number of machine hours	10,000
predetermined overhead rate ($57,500 / 10,000)	$5.75

now,

cost of goods sold:

direct materials (12,800 +7000)	$19,800
direct labour (17,600 +7,700)	25,300
total overhead [3400+1600+2000+3000]*$5.75	57,500
total cost of goods sold	$102,600