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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