Embracing the "minimalist" running movement, Brian and Reneé Miller recently starting a boutique running shoe company, aptly named the Born to Run (BtR) Company. Shoe prices range from $100 to $175, and the business has become quite successful. Brian and Reneé began operations this year with no inventories of any kind. During the year, they purchased $125,000 worth of raw materials (rubber, polyamide fabric, etc.) and incurred $80,000 in labor costs. Brian and Reneé also spent $92,000 on manufacturing overhead expenses and $40,000 on selling costs.
Brian and Reneé manufacture their shoes in small batches of 25 to 100 (the batch size depends on the shoe size - more popular sizes, like a women's size 7 and means size 10, are manufactured in the larger batches while sizes in smaller demand, such as a women's size 10, are made in smaller batches). Brian and Reneé use a costing system in which they trace the cost of materials and labor to individual jobs and allocate overhead to jobs using a predetermined rate of 125% of actual labor cost.
Required:
a. Job PW-9-A, for 50 women's size 9 "Pegasus" shoes, has materials cost of $1,375 and labor costs of $900. Determine the inventoriable cost of job PW-9-A.
b. Brian and Reneé provide the following details at year-end, prior to the disposition of any under- or overapplied overhead. Determine the amount for each cell marked with a "?."

c. Calculate the under- or overapplied overhead for the year.
d. Determine the COGS if Brian and Reneé dispose of the under- or overapplied overhead by charging it to COGS.
e. Determine the COGS if Brian and Reneé dispose of the under- or overapplied overhead by prorating it among the inventory accounts in proportion to their ending balances.

Transcribed Image Text:

Raw Work inFinished Cost of atiasProcess Goods Goods Sold Total Materials Labor Allocated $5,000 $14,250 $21,750 $84,000 $125,000 $17,000 $56,000 $80,000 overheacd 70,000 Ending Balance