Question

Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $420,000 and total machine hours at 60,000. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job: Job 101 Job 102 Job 103 TotalDirect materials used 19,200 14,400 9,600 43,200 Direct labor 28,800 11,200 9,600 49,600 Machine hours 1,000 hours 4,000 hours 2,000 hours 7,000 hoursJob 101 was completed and sold for $60,000.Job 102 was completed but not sold.Job 103 is still in process.Actual overhead costs recorded during the first month of operations totaled $45,000.Required: 1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)2. Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations. (Round your intermediate calculations to 2 decimal places.)3. Compute the balance in the Work in Process Inventory account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)4. How much gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead? (Round your intermediate calculations to 2 decimal places.)5-a. Determine the balance in the Manufacturing Overhead account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)

Answer 1

The predetermined overhead rate is $7.00 per machine hour. The total manufacturing overhead applied to the Work in Process Inventory account is $35,000. The balance in the Manufacturing Overhead account at the end of the first month is $7,000.

Step-by-step explanation:

To calculate the predetermined overhead rate, divide the total estimated manufacturing overhead cost by the total estimated machine hours. In this case, the predetermined overhead rate is $7.00 per machine hour ($420,000 / 60,000).

To compute the total manufacturing overhead applied to the Work in Process Inventory account, multiply the predetermined overhead rate by the actual machine hours used for each job. For Job 101, the applied overhead is $7,000 ($7.00 per machine hour x 1,000 machine hours). For Job 102, the applied overhead is $28,000 ($7.00 per machine hour x 4,000 machine hours).

The balance in the Work in Process Inventory account at the end of the first month is $35,000. This can be calculated by subtracting the applied overhead to the jobs completed and sold ($7,000 for Job 101) from the total actual overhead costs ($45,000).

The gross profit reported during the first month of operations is $14,000. This can be calculated by subtracting the cost of goods sold (direct materials cost + direct labor cost + applied overhead) from the selling price of Job 101 ($60,000 - $43,200 - $49,600 - $7,000).

The balance in the Manufacturing Overhead account at the end of the first month is $7,000. This can be calculated by subtracting the applied overhead to the completed and sold job (Job 101) from the total actual overhead costs ($45,000 - $7,000).

Answer 2

Tyler Tooling Company

1. The predetermined overhead rate is:

= $7

2. The total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations is:

= $49,000

3. The balance in the Work in Process Inventory account at the end of the first month is:

= $86,800

4. The gross profit that the company would report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead is:

= $5,000

5a. The balance in the Manufacturing Overhead account at the end of the first month is:

= $4,000 overapplied

Step-by-step explanation:

a) Data and Calculations:

Estimated total manufacturing overhead for the coming year = $420,000

Estimated total machine hours for the coming year = 60,000 mh

Actual jobs data: Job 101 Job 102 Job 103 Total

Direct materials cost $19,200 $14,400 $9,600 $43,200

Direct labor cost 28,800 11,200 9,600 49,600

Machine hours cost 1,000 4,000 2,000 7,000

Sale of Job 101 = $60,000

Actual overhead for the first month = $45,000

1. Predetermined overhead rate = Estimated overhead/estimated machine hours

= $420,000/60,000

= $7

2. The total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations is:

= total machine hours used * $7

= $49,000 (7,000 * $7)

3. The balance in the Work in Process Inventory account at the end of the first month is:

Work in Process

Account Titles Debit Credit

Direct materials $43,200

Direct labor 49,600

Overhead applied 49,000

Cost of Job 1 sold $55,000 ($19,200+$28,800+$7,000)

Ending balance $86,800 (= costs of Job 102 and 103)

4. The gross profit that the company would report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead is:

= Gross profit for Job 101 = $5,000 ($60,000 - $55,000)

5a. The balance in the Manufacturing Overhead account at the end of the first month is:

= Actual overhead incurred - overhead applied

= $45,000 - $49,000

= $4,000 overapplied