Tyler Tooling Company uses a job order cost system with over

Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $254,200 and total machine hours at 62,000. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:

Job 101 was completed and sold for $50,600.
Job 102 was completed but not sold.
Job 103 is still in process.

Actual overhead costs recorded during the first month of operations totaled $22,990.

Required:
1. Calculate the predetermined overhead rate per machine hour. (Round your answer to 2 decimal places.)

2. Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations. (Round your intermediate calculations to 2 decimal places.)

3. Compute the balance in the Work in Process Inventory account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)

4. How much gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead? (Round your intermediate calculations to 2 decimal places.)

5-a. Determine the balance in the Manufacturing Overhead account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)

5-b. Is it over- or underapplied?

Job 101 Job 102 Total Direct materials used Direct labor Machine hours $ 11,900 $17,200 $ 8,400 $ 6,300 Job 103 $ 5,400 $ 5,500 $25,700 $ 29,000 1,700 hours 2,800 hours 1,400 hours 5,900 hours

Solution

Solution: 1. Predetermined overhead rate = $ 4.10 per machine hour Working Notes: Predetermined overhead rate = Estimated total manufacturing overhead cost / Total machine hours = $254,200 /62,000 =$ 4.10 per machine hour 2. Total manufacturing overhead applied to the Work in Process Inventory account = $24,190 Working Notes: Total manufacturing overhead applied to the Work in Process Inventory account = Total machine hours applied during the month x Pre determined manufacturing OH rate = 5,900 machine hours x $4.10 per machine hour = 5,900 x 4.10 = $24,190 3. Balance in the Work in Process Inventory account = $16,640 Working Notes: JOB 103 is still in work in process Hence, Balance in the Work in Process Inventory account is the JOB 103 total WIP value JOB 103 Directs materials used $5,400 Direct labor $5,500 Manufacturing OH $5,740 [ Machine hours used x OH rate ] [1400 hours x $ 4.10 per m/c hour ] Total $16,640 Balance in the Work in Process Inventory account = $16,640 4. Gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead = $14,530 Working Notes: Since only JOB 101 is only completed & sold Gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead can be only calculated for JOB 101 JOB 101 Revenue $50,600 Less: Cost: Directs materials used $11,900 Direct labor $17,200 Manufacturing OH $6,970 [ Machine hours used x OH rate ] [1700 hours x $ 4.10 per m/c hour ] Gross profit $14,530 5-a. Balance in the Manufacturing Overhead account at the end of the first month = $ 1,200 Working Notes: Manufacturing Overhead A/c Actual (given) $22,990 Applied $24,190 (calculation done no. 2.) Balance $1,200 (overapplied) Notes: Since actual manufacturing Overhead cost is lesser than applied manufacturing overhead cost hence, it is overapplied by $1,200 Because , we applied at predetermined overhead rate not by actual rate. 5-b. OVERAPPLIED Notes: As our calculation done 5-A above it is overapplied by $1200 Please feel free to ask if anything about above solution in comment section of the question.