This problem covers concepts that were presented in Chapters 11 and 12 concerning job-order costing systems. Mid-Life Motorcycles (MLM) is a small shop that builds customized motorcycles, mostly for middle-aged men with significant discretionary income, who are hoping to fulfill a high school dream. Since it works with high-end clients, all of its work is custom, and it makes many of the bike parts, including the frames, in-house. Other parts, such as the engine, are purchased from outside suppliers and then modified in-house. Although most of its bikes are created to-order for a specific individual, the shop occasionally builds a bike with no prearranged buyer. These bikes are sometimes intended to be entered in custom-bike contest and then sold afterwards. The shop has been in existence for 10 years, but for the sake of simplicity, assume it has no beginning inventories for 2011. Five motorcycle projects were worked on during 2011. By the end of the year, four of these projects were completed and three of these four were sold. The following selected data are from MLM's 2011 budget:

The following information relates to production events during 2011.
â–  Raw materials were purchased for $155,000.
â–  Materials used in production totaled $150,800; $11,500 of these were considered indirect materials costs. The remaining $139,300 of direct materials costs related to individual restoration jobs as follows:

â–  Labor costs incurred for production totaled $133,100. The workers are highly skilled craftsmen who require little supervision. Therefore all of these were considered direct labor costs and related to individual restoration jobs as follows:

â–  Paid factory rent of $18,000.
â–  Recorded depreciation on factory equipment of $8,500.
â–  Made $2,500 of payments to outside vendors for maintenance of factory equipment.
â–  Paid factory utilities costs of $2,400.
â–  Applied manufacturing overhead using a predetermined rate of $11.00 per machine hour. The 3,750 machine hours that were used relate to each job as follows:

â–  Completed all restoration jobs except 119 and transferred the projects to finished goods.
â–  Sold three jobs for the following amounts:

â–  Closed the Manufacturing Overhead account to transfer any overapplied or underapplied overhead to the Cost of Goods Sold account.
Required
a. Assume MLM had used direct labor hours (versus machine hours) as its cost driver. Compute its predetermined overhead rate.
b. Determine the ending balance in Raw Materials Inventory.
c. Determine the ending balance in Finished Goods Inventory.
d. Determine the ending balance in Work in Process Inventory.
e. Determine the costs of goods manufactured.
f. Determine the amount of Cost of Goods Sold.
g. Determine the amount of gross margin that was earned on Jobs 115, 116, and 117.
h. Determine the amount of overapplied or underapplied overhead the existed at the end of the year.

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$ 5,000 150,000 130,000 6,000 20,000 11,000 3,000 1,000 2,000 8,000 4,000 6,500 Advertising Direct materials Direct labor Rent on office space Rent on factory space Indirect materials Maintenance costs for factory equipment Utilities costs for office space Utilities costs for factory space Depreciation on factory equipment Machine hours expected to be worked Direct labor hours expected to be worked