Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3: Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively. Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: Job No. Direct Materials Direct Labor 1 $145,000 $35,000 2 320,000 65,000 3 55,000 80,000 Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold. Required: A. Compute the company's predetermined overhead application rate. B. Compute Garrison’s ending work-in-process inventory. C. Determine Garrison’s sales revenue. D. Was manufacturing overhead under- or overapplied during 20x3? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end. F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3: Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively. Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: Job No. Direct Materials Direct Labor 1 $145,000 $35,000 2 320,000 65,000 3 55,000 80,000 Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold. Required: A. Compute the company's predetermined overhead application rate. B. Compute Garrison’s ending work-in-process inventory. C. Determine Garrison’s sales revenue. D. Was manufacturing overhead under- or overapplied during 20x3? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end. F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3: Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively. Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: Job No. Direct Materials Direct Labor 1 $145,000 $35,000 2 320,000 65,000 3 55,000 80,000 Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold. Required: A. Compute the company's predetermined overhead application rate. B. Compute Garrison’s ending work-in-process inventory. C. Determine Garrison’s sales revenue. D. Was manufacturing overhead under- or overapplied during 20x3? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end. F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3:
Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively.
Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor:
Job No.
Direct Materials
Direct Labor
1
$145,000
$35,000
2
320,000
65,000
3
55,000
80,000
Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production.
Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold.
Required: A. Compute the company's predetermined overhead application rate. B. Compute Garrison’s ending work-in-process inventory. C. Determine Garrison’s sales revenue. D. Was manufacturing overhead under- or overapplied during 20x3? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end. F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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