Problem #4:

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.) In computing a predetermined overhead rate at the beginning of the year, the company's estimates were: manufacturing overhead cost, $800,000; and direct materials to be used in production, $500,000. The company has provided the following data :

Beginning

Ending

Raw materials

$20,000

$80,000

Work in Process

150,000

70,000

Finished Goods

260,000

400,000

The following actual costs were incurred during the year:

Purchase of direct raw materials

$510,000

Direct labor cost

90,000

Manufacturing overhead costs:

Indirect labor

170,000

Property taxes

48,000

Depreciation- equipment

260,000

Maintenance

95,000

Insurance

7,000

Rent - Building

180,000

Required:

1.a. Compute the predetermined overhead rate for the year

b. Compute the amount of under- or over-applied overhead for the year.

1.Prepare the statement of cost of goods manufactured for the year.

2.Compute the Cost of Goods Sold for the year. (Do not include the under- or over-applied overhead in the cost of goods sold.) What options are available for disposing of under- or over-applied overhead?

3.Job 215 was started and completed during the year. What price would have been charged to customer if the job required $8,500 in direct materials and $2,700 in direct labor cost and the company priced its jobs at 25% above the job's cost to absorb period cost as well as provide for profit?

4.If direct materials made up $24,000 of the ending work in process inventory balance. How much is the direct labor cost and the manufacturing overhead?