The following account balances and amounts for the month of January were obtained from the general ledger of the Smith Company.
Beginning Work-in-Process (WIP) Inventory Balance $ 0
Ending WIP Inventory Balance 50,000
Total Direct Material Costs Used in January Production 150,000
Total Direct Labor Costs for January Production 70,000
Also note that the Smith Company applies a predetermined manufacturing overhead rate based on direct labor costs (dollars) to allocate (or charge) manufacturing overhead costs to the many different production jobs it performs. At the beginning of the year, the company originally budgeted $450,000 of manufacturing overhead for the year and estimated $150,000 of direct labor costs for the year.
Part A. What was the predetermined manufacturing overhead rate that the company originally calculated and applied to each individual production job throughout the year? Remember that the company implements this rate based upon direct labor costs (dollars), so this rate will be expressed as either a percentage or a multiplier (e.g., 150% or a 1.5 times multiplier). Please show your calculation.
Part B. What was the total amount of manufacturing overhead that was applied (allocated) to all of the production jobs worked for January? Hint: you can calculate this amount using the result from Part A above along with the direct labor cost for January.
Part C. Calculate the total manufacturing costs for the month of January. Hint: you'll need to use the answer from Part B plus some other data provided above.
Part D. Calculate the Cost of Goods Manufactured (COGM) for the month of January. Hint: you'll need to use the answer from Part C plus some other data provided above.