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: Raw materials Work in Process Finished Goods Beginning $20,000 150,000 260,000 The following actual costs were incurred during the year: Purchase of direct raw materials Direct labor cost Manufacturing overhead costs: 3 Ending $80,000 70,000 400,000 $510,000 90,000
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: Raw materials Work in Process Finished Goods Beginning $20,000 150,000 260,000 The following actual costs were incurred during the year: Purchase of direct raw materials Direct labor cost Manufacturing overhead costs: 3 Ending $80,000 70,000 400,000 $510,000 90,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text: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:
Raw materials
Work in Process
Finished Goods
Beginning
$20,000
150,000
260,000
The following actual costs were incurred during the year:
Purchase of direct raw materials
Direct labor cost
Manufacturing overhead costs:
3
Ending
$80,000
70,000
400,000
$510,000
90,000
Transcribed Image Text:Required:
1.
Indirect labor
Property taxes
Depreciation equipment
Maintenance
Insurance
Rent - Building
170,000
48,000
260,000
95,000
7,000
180,000
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?
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