I. Computing Costs of Goods sold (DIRECT METHOD)II. Computing Costs of Goods sold (INDIRECT METHOD)III. Multiple Pre-Determined Overhead rateACCT 2020 1st Edition Lecture 7Outline of Last Lecture I. Job-order CostingII. Compute a Predetermined Overhead RateIII. Materials costIV. Computing Job-costsV. Compute Under-applied or Over-applied Overhead CostOutline of Current LectureI. Computing Costs of Goods sold (DIRECT METHOD)II. Computing Costs of Goods sold (INDIRECT METHOD)III. Multiple Pre-Determined Overhead rateCurrent LectureI. Computing Costs of Goods sold (DIRECT METHOD)- Really concerned with how much overhead to allocate. One way to do this would be through the direct method. Only tricky to remember is… ADJUST for whether overhead was under or over-applied. - Exercise #5o Uxmaiz Corporation had only one job in process during May. Had no finished goods inventory on May 1, the job was started in April and finished in May. 1. First, get a cost per Unit; $190/unitThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best Used as a supplement to your own notes, not as a substitute.2. Second, multiply that by a cost of unit sold; $7600 unadjusted COGS3. Third, adjust for over or under applied overhead; $73001. Begin BAL=5,000 /applied DM= 8,000/ applied DL =2,000 / applied overhead= 4,000; so total job cost is 19,000. 100 units completed. So 19,000/100; average unit product cost is 190 units. 2. $190 per unit, and 40 units sold. $190 x 40 units = $7600 unadjusted COGS3. The overhead applied by $400, so what is the adjusted COGS? 7600-400= $7300II. Computing Costs of Goods sold (INDIRECT METHOD)- Beginning work in process = 30,000 / no beginning finished goods / total manufacturing costs charged to jobs in April was 200,000 (DM 50,000 / DL 60,000 / OH applied 90,000) the ending of work in process was 72,000. Manufacturing overhead was under applied by 5,000. Took 1000 units to COGS of 158,000. 750 sold, end of finished goods at 250. - Create 2 T-Accounts.o The Work in process T account increases for the amount manufacturing costs and decreases with the completion of these goods (costs of good manufactured).o The Finished goods T-account increases with the completion of costs of goods manufactured and decreases with cost of goods sold. o WIP30,000 (30,000+20,000 –x=72,000)200,000 COGS= 158,00072,000o Finished Goods158,000 (0+158,000 – x=39,500)(158,000 / 1000units) x= 158,000-39,500($158/unit) COGS =118,500(250 units x $158)$39,500o SO, we take the unadjusted COGS (118,500) add the under-applied OH (5,000), so your cost of goods sold is (118,500+5,000) =COGS= $123,500- Steps1. Set up WIP and FG T-accounts and enter given info2. Solve for COGM (DR to FG)3. Solve for COGS- Let’s use the Indirect Method on Exercise #5o WIP5,000 (5,000+8,000+2,000+4,000 –x=0)DM-8,000 COGS= 19,000DL-2,000OH-4,0000o Finished GoodsBegin Bal- 0 (0+19,000 – x=11,400)(19,000 / 100units) x= 19,000-11,400($190/unit) COGS =7,600(100-40=60,60 x $190)EOY= $11,400o SO, we take the unadjusted COGS (7,600) subtract the over-applied OH (300), so your cost of goods sold is (7,600-300) =COGS= $7,300III. Multiple Pre-Determined Overhead rate- Might need to use multiple predetermined rates to more accurately predict overhead costs. Remember you have overhead allocated from multiple departments.- POHR = Total Estimated Manufacturing OverheadTotal Estimated Allocation Base- Example 4-9o Milling: Fixed OH = $390,000 / variable ($2/machine hour x 60,000 mhr) $120,000Total Estimated OH = ($390,000 + $120,000) = $510,000POHR = $510,000 = $8.50/mhr60,000 mhro Assembly: Fixed OH = $500,000 / variable ($3.75/Direct labor x 80,000 DL) $300,000Total Estimated OH = ($500,000 + $300,000) = $800,000POHR = $800,000 = $10/DL80,000 DLo Now apply to Job 407 DM for milling/assembly are $800 /$370 = Total DM=$1170 DL for milling/assembly are $45 /$160 = Total DM=$205 OH for milling/assembly are (90 x $8.50)+ (20 x $10) = Total OH $865 TOTAL JOB COST OF