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Costs Allocated to Ending Inventories

Vegas Company's ending Goods in Process Inventory account consists of 4,500 units of partially completed
product, and its Finished Goods Inventory account consists of 11,700 units of product. The factory
manager determines that the Goods in Process Inventory includes a direct materials cost of $10 per unit and
direct labor cost of $7 per unit. Finished goods are estimated to have $12 of direct materials cost per unit
and $9 of direct labor cost per unit. The company established the predetermined overhead rate using the
following predictions: estimated direct labor cost of $300,000, and an estimated factory overhead of $360,000.
The company allocates factory overhead to its goods in process and finished goods inventories based on
direct labor cost. During the period, the company incurred these costs: direct material costs of $460,000, direct
labor costs of $277,000 and factory overhead costs applied of $332,400.

1. Determine the predetermined overhead rate.
2. Compute the total cost of the two ending inventories.
3. Compute cost of goods sold for the year (assume no beginning inventories and no underapplied or
overapplied overhead).

Solution Summary

Cost allocated to ending inventories are examined.