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2. (8 points) Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor
2. (8 points) Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3:
- Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively.
- Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor:
Job No. | Direct Materials | Direct Labor |
1 | $145,000 | $35,000 |
2 | 320,000 | 65,000 |
3 | 55,000 | 80,000 |
- Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production.
- Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold.
A. Compute the company's predetermined overhead application rate.
B. Compute Garrisons ending work-in-process inventory.
C. Determine Garrisons sales revenue.
D. Was manufacturing overhead under- or overapplied during 20x3? By how much?
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