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 $130,500 of manufacturing overhead for an estimated allocation base of $87,000 direct material dollars to be used in production. the company has provided the following data for the just completed year: purchase of raw materials $ 140,000direct labor cost $ 83,000manufacturing overhead costs: indirect labor $ 160,400property taxes $ 8,900depreciation of equipment $ 15,000maintenance $ 11,000insurance $ 8,500rent, building $ 33,000 beginning endingraw materials $ 26,000 $ 11,000work in process $ 49,000 $ 37,000finished goods $ 71,000 $ 58,000 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 $37,000 ending balance in work in process includes $8,200 of direct materials. given this assumption, supply the information missing below:

Instructions are listed below

Explanation:

Giving the following information:

Applies overhead cost to jobs based on direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $130,500 of manufacturing overhead for an estimated allocation base of $87,000 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 $ 83,000

Manufacturing overhead costs:

Indirect labor $ 160,400

Property taxes $ 8,900

Depreciation of equipment $ 15,000

Maintenance $ 11,000

Insurance $ 8,500

Rent, building $ 33,000

Total overhead: 236,800

Inventory:

Beginning Raw Materials $ 26,000

Ending  Raw Materials $11,000

Beginning Work in Process $ 49,000

Ending WiP$ 37,000

Beginning Finished Goods $ 71,000

Ending finished goods $ 58,000

1) Predetermined overhead rate= total estimated overhead for the period/ total amount of allocation base

Predetermined overhead rate= 130500/ 87000= $1.5 per direct material used

2) First, we need to determine the allocated overhead:

Direct materials used= beginning inventory + purchases - ending inventory= 26000 + 140000 - 11000= $155,000

Allocated overhead= 1.5* 155,000= $232,500

Under allocation= real overhead - allocated overhead= 232500 - 130500= 102,000 underallocated

3) Cost of goods manufactured:

Beginning WIP= 49,000

Direct materials= 155000

Direct labor= 83000

Manufacuring overhead (allocated)= 130500

Ending WIP= 37000 (-)

Cost of goods manufactured= $380,500

4) Cost of goods sold= beginning finished inventory + Cost of goods manufactured - ending finished inventory

COGS= 71000 + 380500 - 58000= $393,500

1. Pre - determined rate = $1.5 per direct material used

2. under applied overhead = $ 4300

3.Cost of goods manufactured =$486800

4.COGS= $499800

Explanation:

we know that:

1. Pre-determined overhead rate = estimated manufacturing overhead / total units in allocation base.

       =  130500/ 87000 = $ 1.5 per direct material.

Actual Factory overhead:

Indirect labor = 160400

Property taxes = 8900

Depreciation of equipment = 15000

Maintenance = 11000

Insurance = 8500

Rent building = 33000

Total      =   $ 236800

Applied factory overhead:

Applied factory overhead = Predetermined rate * material used in production.

                         =  $1.5 * 155000 = 232500.

Material used in production:

Material used = opening + purchased - ending

                      = 26000 +140000 - 11000 = 155000.

Amount of under or over applied overhead:

Actual overhead = 236800

Applied overhead = 232500

Under applied overhead = $ 4300.

Cost of goods manufactured:(COGM)

COGM = manufacturing cost + work in process (open) - work in process (end).

Manufacturing cost = direct material used + direct labor + factory overhead

                            = 155000+83000+236800

                             = $474800.

COGM= 474800+49000-37000 = 486800

Cost of goods sold:(COGS)

COGS = finished goods (open) + COGM -finished goods( end)

           = 71000+486800-58000 = $ 499800

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