Question

What is the predetermined overhead rate for the year?

Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased). Its predetermined overhead rate was based on a cost formula that estimated $120,400 of manufacturing overhead for an estimated allocation base of $86,000 direct material dollars to be used in production. The company has provided the following data for the just completed year:

Purchase of raw materials $ 133,000
Direct labor cost $ 82,000
Manufacturing overhead costs:
Indirect labor $ 118,600
Property taxes $ 8,000
Depreciation of equipment $ 18,000
Maintenance $ 15,000
Insurance $ 9,700
Rent, building $ 39,000

Beginning Ending
Raw Materials $ 26,000 $ 13,000
Work in Process $ 44,000 $ 40,000
Finished Goods $ 71,000 $ 60,000

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