Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3: Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively. Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: Job No. Direct Materials Direct Labor 1 $145,000 $35,000 2 320,000 65,000 3 55,000 80,000 Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold. Required: A. Compute the company's predetermined overhead application rate. B. Compute Garrison’s ending work-in-process inventory. C. Determine Garrison’s sales revenue. D. Was manufacturing overhead under- or overapplied during 20x3? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end. F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
Garrison, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3: Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively. Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: Job No. Direct Materials Direct Labor 1 $145,000 $35,000 2 320,000 65,000 3 55,000 80,000 Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold. Required: A. Compute the company's predetermined overhead application rate. B. Compute Garrison’s ending work-in-process inventory. C. Determine Garrison’s sales revenue. D. Was manufacturing overhead under- or overapplied during 20x3? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end. F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter4: Accounting For Factory Overhead
Section: Chapter Questions
Problem 15P: The following information, taken from the books of Herman Brothers Manufacturing represents the...
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- Garrison, Inc., which uses a
job-costing system, began business on January 1, 20x3 and applies manufacturingoverhead on the basis of direct-labor cost. The following information relates to 20x3:
- Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively.
- Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor:
Job No. |
Direct Materials |
Direct Labor |
1 |
$145,000 |
$35,000 |
2 |
320,000 |
65,000 |
3 |
55,000 |
80,000 |
- Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production.
- Actual manufacturing overhead by year-end totaled $233,000. Garrison adjusts all under- and overapplied overhead to cost of goods sold.
Required:
A. Compute the company's predetermined overhead application rate.
B. Compute Garrison’s ending work-in-process inventory.
C. Determine Garrison’s sales revenue.
D. Was manufacturing overhead under- or overapplied during 20x3? By how much?
E. Present the necessary
F. Does the presence of under- or overapplied overhead at year-end indicate that Garrison’s accountants made a serious error? Briefly explain.
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