Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials…
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Question “Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials…”
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 $113,100 of manufacturing overhead for an estimated allocation base of $87,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:
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 $39,000 ending balance in Work in Process includes $8,200 of direct materials. Given this assumption, supply the information missing below:
Answer
1) Predetermine overhead rates = 113100/87000 = 130% direct material
2) Overhead applied = (29000+139000-12000)*1.3 = 202800
Actual overhead = 207500
Below applied overhead = 207500 -202800 = 4700
3) Cost of goods manufactured
Material directly | ||
Beginning raw material | 29000 | |
Purchase of raw material | 139000 | |
Available raw material | 168000 | |
We need less: Ending raw material | -12000 | |
Material directly | 156000 | |
Direct labor | 83000 | |
Overhead applied | 202800 | |
Manufacturing cost total | 441800 | |
Beginning work in process | 47000 | |
Total cost of the work involved | 488800 | |
A lot less: Stop working | -39000 | |
Manufacturing costs | 449800 |
Unadjusted Cost of Goods Sold = 449800+69000-60000 = 4588800
Material directly | 8200 |
Direct labor | 20140 |
Overhead (8200*1.3) | 10660 |
In process inventory | 39000 |
Conclusion
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