Marcelo Products uses 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). It estimates a predetermined overhead rate based on an estimated activity base of direct material dollars to be used in production. The company provided the following data for the year: Estimated manufacturing overhead $ Estimated direct materials used in products 850,000 500,000 S S 520,000 90,000 Purchase of raw materials Direct labor cost Manufacturing overhead costs: Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building S $ $ S S S 171,000 46,000 270,000 105,000 12,000 191,000 Raw Materials Work in Process Finished Goods Beginning $ 25,000 $ $ 160,000 $ $ 260,000 $ Ending 85,000 70,000 410,000 Step 1: Compute the predetermined overhead rate for the year by filling in the green-highlighted cell. Predetermined overhead rate Step 2: Compute the over/underapplied overhead by filling in the green-highlighted cells. Recall that over/underapplied overhead = Actual overhead - Applied overhead. So, we need two things: 1) Actual overhead, and 2) Applied overhead. First, calculate the actual overhead. Indirect labor Property taxes Depreciation of equipment Maintenance Insurance Rent, building Total actual overhead Next, calculate the applied overhead. Recall that applied overhead = Actual Activity Base Used X POHR. We already calculated the POHR in Step 1. Now, we need the actual activity base used. For this problem, the activity base used is direct material dollars used in production. We therefore need the amount of materials used in production Raw Materials Beginning balance Purchases of raw materials Materials used in production Ending Balance Now we can calculate the applied manufacturing overhead. Actual materials used in production Hint: This should NOT be the estimated POHR materials used in production. Total applied overhead Finally, we can calculate the over/underapplied manufacturing overhead. Hint: For the T-account, fill out only the appropriate side debit or credit) for each line. Manufacturing Overhead Actual overhead Applied overhead Over/underapplied overhead Is the overhead underapplied? Type "Yes" or "No." Step 3: Complete the Cost of Goods Manufactured Schedule by filling in the green-highlighted cells Marcelo Products Schedule of Cost of Goods Manufactured Direct materials Beginning raw materials inventory Add: Purchases of raw materials Total raw materials available Less: Ending raw materials inventory Raw materials used in production Direct labor Manufacturing overhead applied to work in process Hint: You caloulated this in Step 2 Total manufacturing costs Add: Beginning Work-in-Process inventory Less: Ending Work-in-Process inventory Cost of goods manufactured Step 4: Calculate the unadjusted Cost of Goods Sold by filling in the green-highlighted cells Beginning finished goods inventory Cost of goods manufactured Cost of goods available for sale Ending finished goods inventory Unadjusted Cost of Goods Sold Step 5: Calculate the Adjusted Cost of Goods Sold by filling in the green-highlighted cells Hint: Whether to add or subtract depends on whether the overhead was overapplied vs. underapplied. Unadjusted Cost of Goods Sold Over/underapplied overhead Adjusted Cost of Goods Sold Do we report the unadjusted COGS or adjusted COGS on the inome statement? Ilype "Unadjusted" or "Adjusted