Compute the unadjusted cost of goods sold. Do not include any underapplied or overapplied overhead in your answer. Assume the $39,000 ending balance in Work in Process includes $8,700 of direct materials. Given this assumption, supply the information missing below: Giano Products uses job-order costing and apples overhead cost to jobs based on direct materlals used in production (not on the basis of raw materials purchased). Its predotermined overhead rate is based on a cost formula that estimated $106,800 of manufacturing overhead for an estimated allocation base of $89,000 direct material dollars to be used in production. The company provided the following data for the just completed year: Required: 1. Compute the predetermined overhead rate. 2. Compute the amount of underapplied or overapplied overhead. 3. Prepare a schedule of cost of goods manufactured. Assume alf rew materials are used in production as direct materials. 4. Compute the unadjusted cost of goods sold. Do not include any underapplied or overapplied overhead in your answer. 5. Assume the $39,000 ending balance in Work in Process includes $8,700 of direct materials, Given this assumption, supply the information missting below: Complete this question by entering your answers in the tabs below. Compute the predetermined overhead rate. compute the amount of underapplied or overapplied overhead.<\/p>\n\n\n\n
The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n To answer this job-order costing problem, we will go step-by-step to:<\/p>\n\n\n\n $$ $$ Answer:<\/strong> 120% of direct materials used<\/strong><\/p>\n\n\n\n To find whether overhead is underapplied or overapplied, we need:<\/p>\n\n\n\n $$ We\u2019re not directly given actual overhead incurred or actual direct materials used, but we can infer these from other parts of the problem (especially from the cost of goods manufactured, and work-in-process details) as we progress. Let\u2019s assume the following example (since the full dataset isn\u2019t visible):<\/p>\n\n\n\n Suppose actual overhead incurred = \\$110,000 Then:<\/p>\n\n\n\n $$ $$ Answer (Example):<\/strong> \\$2,000 underapplied overhead<\/strong><\/p>\n\n\n\n Job-order costing systems allocate costs to individual jobs or batches, and the predetermined overhead rate (POHR) is a key component of this system. It is calculated before the period begins and helps assign overhead to jobs based on a chosen cost driver. In Giano Products\u2019 case, the allocation base is direct materials used<\/strong>, not purchased.<\/p>\n\n\n\n We begin by calculating the POHR<\/strong>, which helps the company apply overhead in proportion to direct materials used. This is determined by dividing estimated manufacturing overhead (\\$106,800)<\/strong> by estimated direct materials used (\\$89,000)<\/strong>. The result is a rate of 120%<\/strong>, meaning for every dollar of direct materials used, the company will apply \\$1.20 of overhead.<\/p>\n\n\n\n Next, we calculate whether the company applied too much or too little overhead. Overapplied<\/strong> overhead occurs when applied exceeds actual; underapplied<\/strong> occurs when applied is less than actual. Assuming Giano used \\$90,000 of direct materials and applied \\$108,000 of overhead (based on POHR), but incurred \\$110,000 in actual overhead, then it underapplied overhead by \\$2,000. This difference is important for adjusting financial statements to reflect accurate costs.<\/p>\n\n\n\n This underapplied amount is not<\/strong> included when computing unadjusted cost of goods sold (COGS)<\/strong>, which includes direct materials, direct labor, and applied overhead<\/strong> for the products manufactured and sold during the period.<\/p>\n\n\n\n Understanding this distinction helps managers and accountants assess cost accuracy and make better operational decisions. Over- or underapplied overhead is usually closed to COGS or prorated among inventory accounts at year-end for accurate financial reporting.<\/p>\n\n\n\n Let me know if you want to complete the rest of the steps (COGM, unadjusted COGS, and work in process detail).<\/p>\n","protected":false},"excerpt":{"rendered":" Compute the unadjusted cost of goods sold. Do not include any underapplied or overapplied overhead in your answer. Assume the $39,000 ending balance in Work in Process includes $8,700 of direct materials. Given this assumption, supply the information missing below: Giano Products uses job-order costing and apples overhead cost to jobs based on direct materlals […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-215908","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/215908","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=215908"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/215908\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=215908"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=215908"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=215908"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n\n\n\n1. Compute the Predetermined Overhead Rate<\/strong><\/h3>\n\n\n\n
\\text{Predetermined Overhead Rate (POHR)} = \\frac{\\text{Estimated Manufacturing Overhead}}{\\text{Estimated Direct Materials Used}}
$$<\/p>\n\n\n\n
\\text{POHR} = \\frac{106,800}{89,000} = 1.2\\ \\text{or} \\ 120\\%
$$<\/p>\n\n\n\n
\n\n\n\n2. Compute the Amount of Underapplied or Overapplied Overhead<\/strong><\/h3>\n\n\n\n
\\text{Applied Overhead} = \\text{Actual Direct Materials Used} \\times \\text{POHR}
$$<\/p>\n\n\n\n
Suppose actual direct materials used = \\$90,000<\/p>\n\n\n\n
\\text{Applied Overhead} = 90,000 \\times 1.2 = 108,000
$$<\/p>\n\n\n\n
\\text{Underapplied Overhead} = 110,000 – 108,000 = 2,000
$$<\/p>\n\n\n\n
\n\n\n\nExplanation (300+ Words):<\/strong><\/h3>\n\n\n\n