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). Its predetermined overhead rate was based on a cost formula that estimated $129,000 of manufacturing overhead for an estimated allocation base of $86,000 direct material dollars to be used in production. The company has provided the following data for the just completed year: Purchase of raw materials $ 140,000 Direct labor cost $ 82,000 Manufacturing overhead costs: Indirect labor $ 148,100 Property taxes $ 8,600 Depreciation of equipment $ 18,000 Maintenance $ 12,000 Insurance $ 7,700 Rent, building $ 38,000 Beginning Ending Raw Materials $ 22,000 $ 10,000 Work in Process $ 47,000 $ 36,000 Finished Goods $ 70,000 $ 60,000 Required: 1. Compute the predetermined overhead rate for the year. 2. Compute the amount of underapplied or overapplied overhead for the year. 3. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials. 4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer. 5. Assume that the $36,000 ending balance in Work in Process includes $8,500 of direct materials. Given this assumption, supply the information missing below:
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Gitano Products operates a
| Purchase of raw materials | $ | 140,000 |
| Direct labor cost | $ | 82,000 |
| Manufacturing overhead costs: | ||
| Indirect labor | $ | 148,100 |
| Property taxes | $ | 8,600 |
| $ | 18,000 | |
| Maintenance | $ | 12,000 |
| Insurance | $ | 7,700 |
| Rent, building | $ | 38,000 |
| Beginning | Ending | |||
| Raw Materials | $ | 22,000 | $ | 10,000 |
| Work in Process | $ | 47,000 | $ | 36,000 |
| Finished Goods | $ | 70,000 | $ | 60,000 |
Required:
1. Compute the predetermined overhead rate for the year.
2. Compute the amount of underapplied or overapplied overhead for the year.
3. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.
4. Compute the unadjusted cost of goods sold for the year. Do not include any underapplied or overapplied overhead in your answer.
5. Assume that the $36,000 ending balance in Work in Process includes $8,500 of direct materials. Given this assumption, supply the information missing below:
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