Problem 4-20 (30 minutes)
1. The predetermined overhead rate was:
Y = $1,275,000 + $3.00 per hour × 85,000 hours
Estimated fixed manufacturing overhead ………………
$1,275,000
Estimated variable manufacturing overhead
$3.00 per computer hour × 85,000 hours……………
255,000
Estimated total manufacturing overhead cost …………
$1,530,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……..
$1,530,000
÷ Estimated total computer hours ……………..
85,000
hours
= Predetermined overhead rate ………………..
$18.00
per hour
2.
Actual manufacturing overhead cost …………………..
$1,350,000
Manufacturing overhead cost applied to Work in
Process during the year: 60,000 actual computer
hours × $18 per computer hour ……………………..
1,080,000
Underapplied overhead cost ……………………………..
$ 270,000
3.
Unadjusted cost of goods sold………………………..
$2,800,000
Underapplied overhead cost …………………………..
270,000
Adjusted cost of goods sold …………………………..
$3,070,000
Problem 4-24 (continued)
(5) The value of the ending finished goods inventory can be determined as
follows:
Job A256
Job A258
Beginning balance …………………..
$1,200
$ 0
Direct materials ………………………
2,600
1,400
Direct labor …………………………...
800
600
Manufacturing overhead applied ..
1,200
900
Total (a) …………………………..…..
$5,800
$2,900
Units completed (b) …………………
100
200
Unit product cost (a) ÷ (b) ……….
$58.00
$14.50
Job A256
Job A258
Total
Units completed ……………………..
100
200
Deduct: Units sold ……….………….
80
40
Units in ending inventory ………….
20
160
Unit product cost ……………………
$58.00
$14.50
Total cost of ending finished
goods inventory ……………………
$1,160
$2,320
$3,480
Finally, the cost of goods sold would be computed as follows:
Manufacturing costs charged to jobs:
Direct materials ……………………………………….
$11,000
Direct labor …………………………………….………
2,800
Manufacturing overhead applied ………………….
4,200
Total manufacturing cost charged to jobs ………..
18,000
Add: Beginning work in process inventory ………..
1,700
19,700
Deduct: Ending work in process inventory ……….
11,000
Cost of goods manufactured …………………………
$ 8,700
Beginning finished goods inventory ………………..
$ 0
Add: Cost of goods manufactured (see above) ….
8,700
Goods available for sale ……………………………….
8,700
Deduct: Ending finished goods inventory …….…..
3,480
Unadjusted cost of goods sold ………………………
5,220
Deduct: Overapplied overhead ………………………
800
Cost of goods sold …………………………..………….
$4,420
