1) Doctor Garage Inc. is a large manufacturer and marketer of unique, custom-made residential garage doors, as well as a major supplier of industrial and commercial doors, grills, and counter shutters for new construction, repair, and remodel markets. Doctor Garage Inc. has developed plans for continued expansion of a network of service operations that sell, install, and service manufactured fireplaces, garage doors, and related products.

Doctor Garage Inc. uses a job cost system and applies overhead to production on the basis of direct labour cost. In calculation a predetermined overhead rate for the year 2019, the company estimated manufacturing overhead to be $24 million and direct labour costs to be $20 million. In addition, the following information is available:

Actual cost incurred during 2019

Direct materials used $ 30,000,000

Direct labour cost incurred 21,000,000

Manufacturing costs incurred during 2019

Insurance factory $ 500,000

Indirect labour 7,500,000

Maintenance 1,000,000

Rent on building 11,000,000

Amortization equipment 2,000,000

Instructions

Answer each of the following questions:

a) Why is Doctor Garage Inc. using a job order costing system?

b) On what basis does Doctor Garage Inc. allocate its manufacturing overhead? Calculate the predetermined overhead rate for the current year

c) Calculate the amount of the under or overapplied overhead for 2019.

d) Doctor Garage Inc. had beginning and ending balances in its work in process and finished goods accounts as follows:

January 1, 2019 December 31, 2019

Work in process $ 5,000,000 $ 4,000,000

Finished goods 13,000,000 11,000,000

Determine the (1) cost of goods manufactured and (2) cost of goods sold for Doctor Garage Inc. during 2019. Assume that any under or overapplied overhead should be included in the cost of goods sold.

e) During 2019, job G408 was started and completed. Its cost sheet showed a total cost of $100,00 and the company prices its product at 50% above its cost. What is the price to the customer if the company follows this pricing strategy?