Question

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 $128,800 of manufacturing overhead for an estimated allocation base of $92,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials $ 136,000
Direct labor cost $ 88,000
Manufacturing overhead costs:
Indirect labor $ 136,100
Property taxes $ 8,200
Depreciation of equipment $ 19,000
Maintenance $ 12,000
Insurance $ 7,400
Rent, building $ 32,000
Beginning Ending
Raw Materials $ 27,000 $ 13,000
Work in Process $ 49,000 $ 37,000
Finished Goods $ 69,000 $ 55,000
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 $37,000 ending balance in Work in Process includes $8,000 of direct materials. Given this assumption, supply the information missing below:
Required 1 Required 2 Required 3 Required 4 Required 5
Compute the predetermined overhead rate for the year. 19% redetermined overhead rate

Answer 1

See explanation below as attached.

Step-by-step explanation:

1. Predetermined overhead is 139% of direct labor hour

2. Under applied overhead is $6,200

Please find attached breakdown and solution to question 1, 2, 3, 4 and 5.