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
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
F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
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