Exercise 3-19 (20 minutes)
1. Because $120,000 of studio overhead was applied to Work in Process on
the basis of $75,000 of direct staff costs, the predetermined overhead
Direct staff costs incurred $75,000
2. The Lexington Gardens Project is the only job remaining in Work in Pro-
cess at the end of the month; therefore, the entire $35,000 balance in
the Work in Process account at that point must apply to it. Recognizing
that the predetermined overhead rate is 160% of direct staff costs, the
Problem 3-21 (45 minutes)
1. The cost of raw materials put into production was:
Raw materials inventory, 1/1 ……………..
$ 15,000
Debits (purchases of materials) ………….
120,000
Materials available for use …………………
135,000
Raw materials inventory, 12/31 ………….
25,000
Materials requisitioned for production ….
$110,000
2. Of the $110,000 in materials requisitioned for production, $90,000 was
als.
Total factory wages accrued during the year (credits to
the Factory Wages Payable account) ………………………..
$180,000
Less direct labor cost (from Work in Process) ……………….
150,000
Indirect labor cost ………………………………………………….
$ 30,000
4. The cost of goods manufactured was $470,000—the credits to the Work
in Process account.
5. The Cost of Goods Sold for the year was:
Finished goods inventory, 1/1 …………………………………….
$ 40,000
Add: Cost of goods manufactured (from Work in Process) ..
470,000
Goods available for sale …………………………………………….
510,000
Finished goods inventory, 12/31 ………………………………….
60,000
Cost of goods sold ……………………………………………………
$450,000
6. The predetermined overhead rate was:
Estimated total manufacturing overhead cost
Predetermined =
overhead rate Estimated total amount of the allocation base
$240,000 160% of direct
= = labor cost
$150,000 direct labor cost
Problem 3-22 (30 minutes)
1. The predetermined overhead rate was:
Y = $795,000 + $1.40 per hour × 75,000 hours
Estimated fixed manufacturing overhead ………………
$795,000
Estimated variable manufacturing overhead
$1.40 per computer hour × 75,000 hours……………
105,000
Estimated total manufacturing overhead cost …………
$900,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……..
$900,000
÷ Estimated total computer hours ……………..
75,000
hours
= Predetermined overhead rate ………………..
$12.00
per hour
Actual manufacturing overhead cost …………………..
$850,000
Manufacturing overhead cost applied to Work in
Process during the year: 60,000 actual MHs ×
$12 per MH ………………………………………………..
720,000
Underapplied overhead cost ……………………………..
$130,000
Cost of Goods Sold ……………………………..
130,000
Manufacturing Overhead …………………
130,000
4. The underapplied balance would be allocated using the following per-
centages:
Overhead applied during the year in:
Work in process …………………………...
$ 36,000
5
%
Finished goods ……………………………..
180,000
25
%
Cost of goods sold ………………………..
504,000
70
%
Total …………………………………………….
$720,000
100
%
The entry to record the allocation of the underapplied overhead would
be:
Work in Process (5% × $130,000) ………..
6,500
Finished Goods (25% × $130,000) ……….
32,500
Cost of Goods Sold (70% × $130,000) ….
91,000
Manufacturing Overhead …………….
130,000
Problem 3-23 (30 minutes)
Schedule of cost of goods manufactured:
Direct materials:
Raw materials inventory, beginning* ……….
$ 40,000
Add: Purchases of raw materials* …………..
290,000
Raw materials available for use ……………..
330,000
Deduct: Raw materials inventory, ending* .
10,000
Raw materials used in production …………..
$320,000
Direct labor ………………………………………….
78,000
Manufacturing overhead applied* ……………..
285,000
Total manufacturing costs* ……………………..
683,000
Add: Work in process inventory, beginning …
42,000
725,000
Deduct: Work in process inventory, ending* .
35,000
Cost of goods manufactured ……………………
$690,000
Finished goods inventory, beginning* ………..
$ 50,000
Add: Cost of goods manufactured …………….
690,000
Cost of goods available for sale* ………………
740,000
Deduct: Finished goods inventory, ending …..
80,000
Unadjusted cost of goods sold* ………………..
660,000
Deduct: Overapplied overhead …………………
15,000
Adjusted cost of goods sold …………………….
$645,000
Income statement:
Sales …………………………………………………
$915,000
Cost of goods sold ($660,000 – $15,000) …..
645,000
Gross margin ……………………………………….
270,000
Selling and administrative expenses:
Selling expenses* ………………………………
$140,000
Administrative expense* ………………………
100,000
240,000
Net operating income* …………………………..
$ 30,000
Problem 3-24 (continued)
Molding Department overhead applied:
110 machine-hours × $8.60 per machine-hour
$ 946
Painting Department overhead applied:
84 direct labor-hours × $12.25 per DLH ……….
1,029
Total overhead cost ………………………………………
$1,975
3. Total cost of Job 205:
Molding
Dept.
Painting
Dept.
Total
Direct materials ……………………..
$ 470
$ 332
$ 802
Direct labor …………………………..
325
588
913
Manufacturing overhead applied ..
946
1,029
1,975
Total cost ……………………………..
$1,741
$1,949
$3,690
Unit product cost for Job 205:
Total manufacturing cost ……………………..
$3,690
÷ Number of units in the job …………………
50
units
= Unit product cost …………………………….
$73.80
per unit
Molding
Dept.
Painting
Dept.
Manufacturing overhead incurred …………
$570,000
$750,000
Manufacturing overhead applied:
65,000 MHs × $8.60 per MH …………….
559,000
62,000 direct labor-hours × $12.25 per
direct labor-hour ………………………….
759,500
Underapplied (or overapplied) overhead ..
$ 11,000
$ (9,500)