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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
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 $110,500 of manufacturing overhead for an estimated allocation base of $85,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials Direct labor cost Manufacturing overhead costs: $137,000 $ 81,000 Indirect labor Property taxes Depreciation of equipment Maintenance insurance Rent, building $114,000 $8,900 $ 19,000 $ 14,000 $ 8,200 30,000 Raw Materials Work in Process Finished Goods Beginning Ending $ 23,000 13,000 $ 49,000 40,000 $ 72,000 57,000
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