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determining inventory balances overhead

The following account balances as of January 1, 2008, were selected from the general ledger of Browning Manufacturing Company:

Work in process inventory $0
Materials inventory 521,000
Finished goods inventory $44,000

Additional data:
1) Actual manufacturing overhead for January amounted to $59,000.
2) Total direct labor cost for January was $56,000.
3) The predetermined manufacturing overhead rate is based on direct labor cost. The budget for 2008 called for $300,000 of direct labor cost and $369,000 of manufacturing overhead costs.
4) The only job unfinished on January 31, 2008, was Job No. 410, for which total labor charges were $5,600 (700 direct labor hours) and total direct material charges were $10,000.
5) Cost of direct materials placed in production during January totaled $100,000. There were no indirect material requisitions during January, 20X8.
6) January 31 balance in materials inventory was $29,000.
7) Finished goods inventory balance on January 31 was $30,000.

Use the above to:

1) Determine the predetermined manufacturing overhead rate.

2) Determine the amount of materials purchased during January.

3) Determine cost of goods manufactured for January.

4) Determine the work in process inventory balance on January 31.

5) Determine cost of goods sold for january.

6) Determine whether manufacturing overhead is overallocated or underallocated and by what amount.

Solution Preview


1) The manufacturing/labor overhead rate the company determined ("predetermined manufacturing overhead is based on the direct labor rate"). $369,000/$300,000 = 1.23 So, you would multiply the direct labor by 1.23 to calculate the manufacturing overhead rate. In other words, for every $1 spent on labor, $1.23 is spent on manufacturing overhead.

2) Beginning period inventory: $521,000 (?)
less: Actual inventory used in production: $100,000
plus: Direct material purchases:
Ending inventory: $29,000
As you can see the math does not work, as the beginning inventory ...

Solution Summary

determining overhead, inventory, etc. in manufacturing