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 $800,000 of manufacturing overhead for an estimated allocation base of $500,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials	$510,000
Direct labor cost	$90,000
Manufacturing overhead costs:
Indirect labor	$170,000
Property taxes	$48,000
Depreciation of equipment	$260,000
Maintenance	$95,000
Insurance	$7,000
Rent, building	$180,000

	Beginning	Ending
Raw materials	$20,000	$80,000
Work in process	$150,000	$70,000
Finished Goods	$260,000	$400,000

Required:

1. Compute the predetermined overhead rate for the year.
2. Compute the amount of under applied or over applied 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 under applied or over applied overhead in your answer.
5. Assume that the $70,000 ending balance in WIP includes $24,000 of direct materials. Given this assumption, supply the information missing below.

Direct materials	$24,000
Direct labor	?
Manufacturing overhead	?
Work in process inventory	$70,000

6. Memo: Within your business memo address the following questions:
   1. Explain why the manufacturing overhead was under applied or over applied for the year?
   2. What options are available for disposing of under applied or over applied overhead?
   3. Discuss how the predetermined factory overhead rate can be used in job order cost accounting to assist management in pricing jobs.
   4. Embed memo within Excel Document

• You must use the Excel template provided on blackboard otherwise your project will not be graded.