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 $118,300 of manufacturing overhead for an estimated allocation base of $91,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials	$	136,000
Direct labor cost	$	87,000
Manufacturing overhead costs:
Indirect labor	$	115,500
Property taxes	$	8,400
Depreciation of equipment	$	17,000
Maintenance	$	16,000
Insurance	$	10,900
Rent, building	$	31,000

	Beginning		Ending
Raw Materials	$	27,000	$	13,000
Work in Process	$	49,000	$	37,000
Finished Goods	$	72,000	$	55,000

Required:

1. Compute the predetermined overhead rate for the year.

2. Compute the amount of underapplied or overapplied 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 underapplied or overapplied overhead in your answer.

5. Assume that the $37,000 ending balance in Work in Process includes $8,600 of direct materials. Given this assumption, supply the information missing below:

Compute the predetermined overhead rate for the year.

Predetermined overhead rate

130

%

Compute the amount of underapplied or overapplied overhead for the year.

Underapplied

overhead

$6,400

Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.

Gitano Products
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$27,000
Add: Purchases of raw materials	136,000
Total raw materials available	163,000
Less: Ending raw materials inventory	13,000
Raw materials used in production		$150,000
Direct labor		87,000
Manufacturing overhead applied to work in process
Total manufacturing costs
Add: Beginning work in process inventory		49,000
		49,000
Less: Ending work in process inventory		37,000
Cost of goods manufactured

Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer.

	Unadjusted cost of goods sold

Assume that the $37,000 ending balance in Work in Process includes $8,600 of direct materials. Given this assumption, supply the information missing below:

Direct materials
Direct labor
Manufacturing overhead
Work in process inventory	$0