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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
