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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 In computing

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.) In computing a predetermined overhead rate at the beginning of the year, the company’s estimates were: manufacturing overhead cost, $800,000; and direct materials to be used in production, $500,000. The company has provided the following data :

 

Beginning

Ending

Raw materials

$20,000

$80,000

Work in Process

150,000

70,000

Finished Goods

260,000

400,000

 

The following actual costs were incurred during the year:

 

 

Purchase of direct raw materials

$510,000

 

Direct labor cost

90,000

 

Manufacturing overhead costs:

 

 

Indirect labor

170,000

 

Property taxes

48,000

 

Depreciation- equipment

260,000

 

Maintenance

95,000

 

Insurance

7,000

 

Rent - Building

180,000

     

Required:

1. a. Compute the predetermined overhead rate for the year

b.Compute the amount of under- or over-applied overhead for the year.

II. Manufacturing overhead applied per unit

$ 800,000 / $ 500,000

= $ 1.60

MOH applied for the year

$ 20,000+510,000-80000

= $ 450,000

Actual Manufacturing overhead:

 

 

Indirect Labor

$170,000

 

Property Tax

$48,000

 

Insurance Expense

$7,000

 

Depreciation – Factory equipment

$260,000

 

Maintenance

$95,000

 

Rent - Building

$180,000

 

Total

 

$ 760,000

Under-applied MOH

$ 720,000 – 760,000

-$ 40,000

 

 

 

 

 

 

1. Prepare the statement of cost of goods manufactured for the year.

2. Compute the Cost of Goods Sold for the year. (Do not include the under- or over-applied overhead in the cost of goods sold.) What options are available for disposing of under- or over-applied overhead?

3. Job 215 was started and completed during the year. What price would have been charged to customer if the job required $8,500 in direct materials and $2,700 in direct labor cost and the company priced its jobs at 25% above the job’s cost to absorb period cost as well as provide for profit?

4. If direct materials made up $24,000 of the ending work in process inventory balance. How much is the direct labor cost and the manufacturing overhead?

Jun 26 2020 View more View Less

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