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Gitano Products uses a job-order costing method and bases overhead costs on the actual materials used in production when applying them to projects (not on the basis of raw materials purchased). Direct materials are a general category for all materials. The company's expectations were: manufacturing overhead cost, 800,000; direct materials to be utilized in production, 500,000; and a fixed overhead rate at the beginning of the year.
Instructions are listed below
What is schedule of cost of goods manufactured?
- An approach to figuring out how much a firm spends on production expenses is to use the schedule of cost of items created. It is frequently employed in accounting as an indicator of the overall cost of items produced during a specific time period.
- The cost of goods created statement is a crucial component of management accounting because it makes it possible to determine how much a business spends on producing items. The businesses create a schedule of cost of goods created to examine how much money is spent producing final items over the course of an accounting period.
- For the production of completed items, many industrial organizations need raw materials. The firm employs a variety of tools, technology, and labor during the production process, which affects the price of the products produced.
- In order to calculate the schedule of cost of products made, starting work in progress inventory must be added to the overall manufacturing costs, and ending work in process inventory must be deducted from that total.
- The cost of produced items will show how much money was spent on the creation of completed goods in the outcome. The calculations are typically completed within a certain time frame that is established by the successfully completed production process.
1. a. Compute the predetermined overhead rate for the year.
Predetermined overhead rate = [tex]\frac{estimated total manufacturing overhead cost}{Estimated total amount of the allocation base}[/tex]
=[tex]\frac{800000}{500000}[/tex]
=160%
1b. Compute the amount of underapplied or overapplied overhead for the year
Amount of direct materials used in production
for the year:
Raw materials inventory, beginning $20,000.00
Add, Purchases of raw materials. $510,000.00
Raw materials available $530,000.00
Deduct: Raw materials inventory, ending $(80,000.00)
Raw materials used in production $ 450,000.00
Actual manufacturing overhead costs:
Indirect labour $170,000.00
Property Tax $48,000.00
depreciation $260,000.00
Maintenance $95,000.00
Insurance $7,000.00
Rent of Building $180,000.00
Total actual overhead $760,000.00
Applied manufacturing overhead costs $720,000.00
$450,000 × 160%
Total actual overhead $760,000.00
Under applied overhead $40,000.00
2.Prepare a schedule of cost of goods manufactured for the year Gitano Products Schedule of Cost of Goods Manufactured
Raw materials used in production $450,000.00
Direct Labour $90,000.00
Manufacturing overhead applied to work in
process $20,000.00
Total manufacturing costs $1,260,000.00
Add: Work in process, beginning $ 150,000.00
Less: Work in process, closing $(70,000.00)
Cost of goods manufactured $1,340,000.00
3. Compute the Cost of Goods Sold for the year Finished goods inventory, beginning $260,000.00
Add: Cost of goods manufactured $1,340,000.00
Deduct: Finished goods inventory, ending $(400,000.00)
Cost of goods sold $1,200,000.00
The underapplied overhead can either be closed out to Cost of Goods Sold or allocated between Work in Process, Finished Goods, and Cost of Goods Sold based on the overhead applied during the year in the ending balance in each of these accounts
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