Gratitude Company provided the following information in rela

Gratitude Company provided the following information in relation to the construction of a building during the year: Direct labor Materials Overhead 6,000,000 4,200,000 7,000,000 3,000,000 2,000,000 Total Finished goods Building 1,800,000 4,000,000 The following assumptions are made: 1. No overhead is to be assigned to the building. 2. Normal production of finished goods is 180,000 units. Because of the construction of the building, finished goods production totaled only 135,000 units. The building is to be charged with the overhead which would have been charged to the 45,000 units which were not produced. 3. Overhead is to be apportioned in the ratio of direct labor. Required: Compute the cost of finished goods and building

Solution

cost of finished goods

Direct labor = 4200000

materials = 3000000

overhead = 1400000 (2000000*4200000/6000000)

Total cost of finished goods = 8600000

Cost of building

Direct labor = 1800000

materials = 4000000

overhead = 600000 (2000000*1800000/6000000)

Total cost of building = 6400000