The Pacific Manufacturing Company operates a job-order system and applies overhead cost to jobs on the basis of direct labor costs. Its predetermined overhead rate was based on a cost formula that estimated $126,000 of manufacturing overhead for an estimated allocation base of $84, 000 direct labor dollars. The company has provided the following data.
|Work in Process||$||44,000||$||40,000|
The following actual costs were incurred during the year:
|Purchase of raw materials (all direct)||$||133,000|
|Direct labor cost||$||80,000|
|Manufacturing overhead costs:|
|Depreciation of equipment||$||18,000|
1.a. Compute the predetermined overhead rate for the year.
1.b. Compute the amount of underapplied or overapplied overhead for the year.
2. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.
3.a. Compute the unadjusted cost of goods sold for the year. (Do not include any underapplied or overapplied overhead in your cost of goods sold figure.)
3.b. Identify the options available for disposing of underapplied or overapplied overhead?
4. Job 137 was started and completed during the year. What price would have been charged to the customer if the job required $3,200 in materials and $4,200 in direct labor cost, and the company priced its jobs at 40% above the job cost according to the accounting system?
5. Direct labor made up $8,000 of the $40,000 ending Work in Process inventory balance.