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 $111,800 of manufacturing overhead for an estimated allocation base of $86,000 direct material dollars to be used in production. The company has provided the following data for the just completed year.
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Purchase of raw materials
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$134,000
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Direct labor cost
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$ 82,000
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Manufacturing overhead costs:
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Indirect labor
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$108,100
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Property taxes
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$ 8,800
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Depreciation of equipment
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S 18,000
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Maintenance
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$ 13,000
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Insurance
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$ 10,300
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Rent, building
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$ 38,000
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Beginning Ending S 25,000 S 11,000 $ 45,000 $ 40,000 $ 69,000 S 59,000
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Raw Materials Work in Process Finished Goods
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Required:
a. Compute the predetermined overhead rate for the year.
b. Compute the amount of underapplied or overapplied overhead for the year.
Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.
Compute the unadjusted cost of goods sold for the year. (Do not include any underapplied or overapplied overhead in your cost of goods sold figure.)