# The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost.

The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost.

P3-24 The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. Its predetermined overhead rate was based on a cost formula that estimated \$126,000 of manufacturing overhead for an estimated allocation base of \$84,000 direct labor dollars.

The company has provided the following data.
Beginning Ending
Raw Materials \$21,000 \$16,000
Work in Process \$44,000 \$40,000
Finished Goods \$68,000 \$60,000

The following actual costs were incurred during the year:
Purchase of raw materials (all direct) \$133,000
Direct labor cost \$80,000
Insurance, factory \$7,000
Depreciation of equipment \$18,000
Indirect labor \$42,000
Property taxes \$9,000
Maintenance \$11,000
Rent, building \$36,000

Required:
1-a. Compute the predetermined overhead rate for the year.
1-b. Compute the amount of underapplied or overapplied overhead for the year.
2. Prepare a schedule of cost of goods manufactured for the year. Assume all raw materials are used in production as direct materials.
3-a. Compute the unadjusted cost of goods sold for the year. (Do not include any under applied or over applied overhead in your cost of goods sold figure.)
3-b. Identify the options available for disposing of underapplied or overapplied overhead? (You may select more than one answer.
4. Job 137 was started and completed during the year. What price would have been charged to the customer if the job required \$3,200 in materials and \$4,200 in direct labor cost, and thecompany priced its jobs at 40% above the jobâ€™s cost according to the accounting system?
5. Direct labor made up \$8,000 of the \$40,000 ending Work in Process inventory balance. Supply the information missing below

Direct materials \$
Direct labor 8,000