Question

# Problem 3-14 Schedule of Cost of Goods Manufactured; Overhead Analysis [LO3-3, LO3-4] Gitano Products operates a...

Problem 3-14 Schedule of Cost of Goods Manufactured; Overhead Analysis [LO3-3, LO3-4]

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 \$114,400 of manufacturing overhead for an estimated allocation base of \$88,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

 Purchase of raw materials \$ 137,000 Direct labor cost \$ 84,000 Manufacturing overhead costs: Indirect labor \$ 114,800 Property taxes \$ 8,100 Depreciation of equipment \$ 19,000 Maintenance \$ 14,000 Insurance \$ 7,400 Rent, building \$ 31,000
 Beginning Ending Raw Materials \$ 21,000 \$ 12,000 Work in Process \$ 47,000 \$ 40,000 Finished Goods \$ 71,000 \$ 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.

5. Assume that the \$40,000 ending balance in Work in Process includes \$8,800 of direct materials. Given this assumption, supply the information missing below:

1) Predetermine overhead rate = 114400/88000 = 130% of material

2) Applied overhead = (21000+137000-12000)*1.3 = 189800

Under applied overhead = 194300-189800 = 4500

3) Schedule of cost of goods manufactured

 Direct material used Beginning raw material 21000 Raw material purchase 137000 Raw material available for use 158000 Less: Ending raw material -12000 Material used 146000 Direct labor 84000 Manufacturing overhead 189800 Total manufacturing cost 419800 Beginning work in process 47000 Total Cost of work in process 466800 Less: Ending work in process -40000 Cost of goods manufactured 426800

4) Schedule of cost of goods sold

 Beginning finished goods 71000 Cost of goods manufactured 426800 Cost of goods available for sale 497800 Less: Ending finished goods -58000 Cost of goods sold 439800

5) Calculate following

 Ending work in process 40000 Direct material 8800 Direct labor (40000-8800-11440) 19760 Overhead (8800*1.3) 11440

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