The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 45,000 machine- hours. In addition, capacity is 52,000 machine-hours and the actual activity for the year is 47,100 machine-hours. All of the manufacturing overhead is fixed and is $1,029,600 per year. For simplicity, it’s assumed that this is the esti- mated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.
Required:
A. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
B. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.
C. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
D. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.
Click here for the solution: The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity
Showing posts with label overhead. Show all posts
Showing posts with label overhead. Show all posts
Wednesday, April 13, 2016
1. Since overhead costs are indirect costs, _______. (Points : 1)
1. Since overhead costs are indirect costs, _______. (Points : 1)
2. An actual cost system differs from a normal cost system in that an actual cost system ______. (Points : 1)
3. One reason annual overhead application rates are used is ______. (Points : 1)
4. When a manufacturing company has a highly automated manufacturing plant producing many different products, which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process? (Points : 1)
5. In the formula y = a + bX, y represents _______. (Points : 1)
6. If the level of activity increases, _______. (Points : 1)
7. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a _______. (Points : 1)
8. Reno Corporation uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur? (Points : 1)
9. Gary Corporation has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units: $36,600 + $.80(units)
For output of 200,000 units or more: $43,000 + $.80(units)
How much overhead should Gary expect if the firm plans to produce 200,000 units? (Points : 1)
10. Aztec Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus 25 cents per mile, what is the expected cost to move 800 miles? (Points : 1)
11. Aquatic Motor Company is exploring different prediction models that can be used to forecast indirect labor costs. One independent variable under consideration is machine hours. Following are matching observations on indirect labor costs and machine hours for the past six months:
Month Machine hours Indirect labor costs
1 300 $20,000
2 400 $24,000
3 240 $17,000
4 370 $22,000
5 200 $13,000
6 225 $14,000
In a high-low model, which months' observations would be used to compute the model's parameters? (Points : 1)
12. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in _______. (Points : 1)
13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the _______. (Points : 1)
14. The FASB requires which of the following to be used in preparation of external financial statements? (Points : 1)
15. An ending inventory valuation on an absorption costing balance sheet would _______. (Points : 1)
16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated? (Points : 1)
17. The costing system that classifies costs by functional group only is _______. (Points : 1)
18. The costing system that classifies costs by both functional group and behavior is _______. (Points : 1)
19. Another name for variable costing is _______. (Points : 1)
20. If a firm uses variable costing, fixed manufacturing overhead will be included _______. (Points : 1)
Click here for the solution: 1. Since overhead costs are indirect costs, _______. (Points : 1)
2. An actual cost system differs from a normal cost system in that an actual cost system ______. (Points : 1)
3. One reason annual overhead application rates are used is ______. (Points : 1)
4. When a manufacturing company has a highly automated manufacturing plant producing many different products, which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process? (Points : 1)
5. In the formula y = a + bX, y represents _______. (Points : 1)
6. If the level of activity increases, _______. (Points : 1)
7. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a _______. (Points : 1)
8. Reno Corporation uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur? (Points : 1)
9. Gary Corporation has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units: $36,600 + $.80(units)
For output of 200,000 units or more: $43,000 + $.80(units)
How much overhead should Gary expect if the firm plans to produce 200,000 units? (Points : 1)
10. Aztec Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus 25 cents per mile, what is the expected cost to move 800 miles? (Points : 1)
11. Aquatic Motor Company is exploring different prediction models that can be used to forecast indirect labor costs. One independent variable under consideration is machine hours. Following are matching observations on indirect labor costs and machine hours for the past six months:
Month Machine hours Indirect labor costs
1 300 $20,000
2 400 $24,000
3 240 $17,000
4 370 $22,000
5 200 $13,000
6 225 $14,000
In a high-low model, which months' observations would be used to compute the model's parameters? (Points : 1)
12. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in _______. (Points : 1)
13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the _______. (Points : 1)
14. The FASB requires which of the following to be used in preparation of external financial statements? (Points : 1)
15. An ending inventory valuation on an absorption costing balance sheet would _______. (Points : 1)
16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated? (Points : 1)
17. The costing system that classifies costs by functional group only is _______. (Points : 1)
18. The costing system that classifies costs by both functional group and behavior is _______. (Points : 1)
19. Another name for variable costing is _______. (Points : 1)
20. If a firm uses variable costing, fixed manufacturing overhead will be included _______. (Points : 1)
Click here for the solution: 1. Since overhead costs are indirect costs, _______. (Points : 1)
Wednesday, November 11, 2015
Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows
12-49 Direct and Step-Down Methods of Allocation
Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows:
Building and grounds $ 20,000
Personnel 1,200
General factory administration* 28,020
Cafeteria operating loss 1,430
Storeroom 2,750
Machining 35,100
Assembly 56,500
Total $145,000
*To be allocated before cafeteria.
Management has decided that the most sensible product costs are achieved by using departmental overhead rates. These rates are developed after allocating appropriate service department costs to production departments.
Cost-allocation bases for allocation are to be selected from the following data:
Square Feet of Direct-Labor Number of Floor Space Total Number of Department Hours Employees Occupied Labor Hours Requisitions
Building and grounds — — — — —
Personnel* — — 2,000 — —
General factory administration — 35 7,000 — —
Cafeteria operating loss — 10 4,000 1,000 —
Storeroom — 5 7,000 1,000 —
Machining 5,000 50 30,000 8,000 3,000
Assembly 15,000 100 50,000 17,000 1,500
20,000 200 100,000 27,000 4,500
*Basis used is number of employees.
1. Allocate service department costs by the step-down method. Develop overhead rates per direct labor hour for machining and assembly.
2. Same as in number 1, using the direct method.
3. What would be the plantwide factory-overhead application rate, assuming that direct-labor hours are used as a cost-allocation base?
4. Using the following information about two jobs, prepare three different total overhead costs for each job, using rates developed in numbers 1, 2, and 3.
Direct-Labor Hours
Machining Assembly
Job K10 19 2
Job K12 3 18
Click here for the solution: Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows
Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows:
Building and grounds $ 20,000
Personnel 1,200
General factory administration* 28,020
Cafeteria operating loss 1,430
Storeroom 2,750
Machining 35,100
Assembly 56,500
Total $145,000
*To be allocated before cafeteria.
Management has decided that the most sensible product costs are achieved by using departmental overhead rates. These rates are developed after allocating appropriate service department costs to production departments.
Cost-allocation bases for allocation are to be selected from the following data:
Square Feet of Direct-Labor Number of Floor Space Total Number of Department Hours Employees Occupied Labor Hours Requisitions
Building and grounds — — — — —
Personnel* — — 2,000 — —
General factory administration — 35 7,000 — —
Cafeteria operating loss — 10 4,000 1,000 —
Storeroom — 5 7,000 1,000 —
Machining 5,000 50 30,000 8,000 3,000
Assembly 15,000 100 50,000 17,000 1,500
20,000 200 100,000 27,000 4,500
*Basis used is number of employees.
1. Allocate service department costs by the step-down method. Develop overhead rates per direct labor hour for machining and assembly.
2. Same as in number 1, using the direct method.
3. What would be the plantwide factory-overhead application rate, assuming that direct-labor hours are used as a cost-allocation base?
4. Using the following information about two jobs, prepare three different total overhead costs for each job, using rates developed in numbers 1, 2, and 3.
Direct-Labor Hours
Machining Assembly
Job K10 19 2
Job K12 3 18
Click here for the solution: Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows
The Central Railroad allocates all central corporate overhead costs to its divisions
12-A3 Allocation of Central Costs
The Central Railroad allocates all central corporate overhead costs to its divisions. Some costs, such as specified internal auditing and legal costs are identified on the basis of time spent. However, other costs are harder to allocate so the revenue achieved by each division is used as an allocation base. Examples of such costs are executive salaries, travel, secretarial, utilities, rent, depreciation, donations, corporate planning, and general marketing costs.
Allocations on the basis of revenue for 20X7 were (in millions):
Division Revenue Allocated Costs
Northern $120 $ 6
Midwest 240 12
Texas-Oklahoma 240 12
Total $600 $30
In 20X8, Northern’s revenue remained unchanged. However, Texas-Oklahoma’s revenue soared to $280 million because of unusually large imports from Mexico. The latter are troublesome to forecast because of variations in world markets. Midwest had expected a sharp rise in revenue, but severe competitive conditions resulted in a decline to $200 million. The total cost allocated on the basis of revenue was again $30 million, despite rises in other costs. The president was pleased that central costs did not rise for the year.
1. Compute the allocations of costs to each division for 20X8.
2. How would each division manager probably feel about the cost allocation in 20X8 as compared with 20X7? What are the weaknesses of using revenue as a basis for cost allocation?
3. Suppose the budgeted revenues for 2002 were $120 million, $240, and $280, respectively, and the budgeted revenues were used as a cost driver for allocation. Compute the allocations of costs to each division for 20X8. Do you prefer this method to the one used in requirement 1? Why?
4. Many accountants and managers oppose allocating any central costs. Why?
Click here for the solution: The Central Railroad allocates all central corporate overhead costs to its divisions
The Central Railroad allocates all central corporate overhead costs to its divisions. Some costs, such as specified internal auditing and legal costs are identified on the basis of time spent. However, other costs are harder to allocate so the revenue achieved by each division is used as an allocation base. Examples of such costs are executive salaries, travel, secretarial, utilities, rent, depreciation, donations, corporate planning, and general marketing costs.
Allocations on the basis of revenue for 20X7 were (in millions):
Division Revenue Allocated Costs
Northern $120 $ 6
Midwest 240 12
Texas-Oklahoma 240 12
Total $600 $30
In 20X8, Northern’s revenue remained unchanged. However, Texas-Oklahoma’s revenue soared to $280 million because of unusually large imports from Mexico. The latter are troublesome to forecast because of variations in world markets. Midwest had expected a sharp rise in revenue, but severe competitive conditions resulted in a decline to $200 million. The total cost allocated on the basis of revenue was again $30 million, despite rises in other costs. The president was pleased that central costs did not rise for the year.
1. Compute the allocations of costs to each division for 20X8.
2. How would each division manager probably feel about the cost allocation in 20X8 as compared with 20X7? What are the weaknesses of using revenue as a basis for cost allocation?
3. Suppose the budgeted revenues for 2002 were $120 million, $240, and $280, respectively, and the budgeted revenues were used as a cost driver for allocation. Compute the allocations of costs to each division for 20X8. Do you prefer this method to the one used in requirement 1? Why?
4. Many accountants and managers oppose allocating any central costs. Why?
Click here for the solution: The Central Railroad allocates all central corporate overhead costs to its divisions
Monday, October 26, 2015
Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
ACC 560 Week 2 Assignment
E2-5 Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Click here for the solution: Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
E2-5 Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Click here for the solution: Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
Sunday, September 27, 2015
Lasso Corp. budgeted $250,000 of overhead cost for 2008
1) Lasso Corp. budgeted $250,000 of overhead cost for 2008. Actual overhead costs for the year were $240,000. Lasso's plant-wide allocation base, machine hours, was budgeted at 50,000 hours. Actual machine hours were 40,000. Budgeted units to be produced are 100,000 units. Lasso's single plant-wide factory overhead rate for 2008 is
2) Stewart Marketing Inc. manufactures two products, A and B. Presently, the company uses a single Plant-Wide factory overhead rate for allocating overhead to products. From the following information, determine the single-wide factory overhead rate:
Direct Labor
Overhead Hours (dlh) A B
Painting Dept. $248,000 10,000 dlh 16 dlh 4 dlh
Finishing Dept. 72,000 10,000 dlh 4 dlh 16 dlh
Totals $320,000 20,000 dlh 20 dlh 20 dlh
3) The Kaumajet Factory produces two products - small lamps and desk lamps. It has two separate departments - finishing and production. The overhead budget for the finishing department is $550,000, using 500,000 direct labor hours. The overhead budget for the production department is $400,000 using 80,000 direct labor hours. If the budget estimates that a small lamp will require 2 hours of finishing and 1 hours of production, how much factory overhead will be allocated to each unit of small lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours?
4) Stewart Marketing Inc. manufactures two products, A and B. From the following information, determine the overhead from both production departments allocated to each unit of product A if the company uses a multiple department rate system.
Product
Direct Labor
Overhead Hours (dlh) A B
Painting Dept. $248,000 10,000 dlh 16 dlh 4 dlh
Finishing Dept. 72,000 10,000 dlh 4 dlh 16 dlh
Totals $320,000 20,000 dlh 20 dlh 20 dlh
5) It would make sense to use any of the following as an allocation base for calculating factory overhead rates except:
6) Phelan Systems Corporation is estimating activity costs associated with producting disk drives tapes drives, and wire drives. The indirect labor can be traced for four separate activity pools. The budgeted activity cost and activity base information, along with the estimated activity-based information, is provided below.
Procurement $36000 Number of purchased order
Scheduling $240000 Number of production orders
Material handling $48000 Number of moves
Product development $72000 Number of engineering changes
Production $1420000 Machine hours
Disk Drives 4000(# XXXXX purchase orders) 300(# XXXXX production orders) 1400(# XXXXX moves) 10(# XXXXX engineering changes) 2000(machine hours) 2000(# XXXXX units)
Tape drives 2000(# XXXXX purchase orders) 150(# XXXXX production orders) 600(# XXXXX moves) 5(# XXXXX engineering changes) 8000(machine hours) 4000(# XXXXX units)
Wire drive 12000(# XXXXX purchase orders) 800(# XXXXX production orders) 4000(# XXXXX moves) 25(# XXXXX engineering changes) 10000(machine hours) 2500(# XXXXX units)
Determine the activity rate for the procurement per purchase order.
7) The Nite Lite Factory has determined that its budgeted factory overhead budget for the year is $6,750,000 and budgeted direct labor hours are 5,000,000. Using the single plantwide factory overhead rate based on direct labor hours, determine the factory overhead rate for the year.
8) The southwest leather company manufactures leather handbages (H) and moccasins (M). For Simplicity reasons, they have decided to use single plantwide factory overhead rate method to allocate factory overhead. The factory overhead estimated per unit together with materials and direct labor will help determine selling prices. Calculate the amount of factory overhead to be allocated to each unit using direct labor hours.
Handbags =60,000 units 2 hours of direct labor
Moccasins = 40,000 units, 3 hours of direct labor
Total Budgeted factory overhead cost = 360,000
9) Using multiple department factory overhead rates instead of single plant - wide factory overhead rate:
10) Using a Plant-wide factory overhead rate distorts product costs when:
Click here for the solution: Lasso Corp. budgeted $250,000 of overhead cost for 2008
2) Stewart Marketing Inc. manufactures two products, A and B. Presently, the company uses a single Plant-Wide factory overhead rate for allocating overhead to products. From the following information, determine the single-wide factory overhead rate:
Direct Labor
Overhead Hours (dlh) A B
Painting Dept. $248,000 10,000 dlh 16 dlh 4 dlh
Finishing Dept. 72,000 10,000 dlh 4 dlh 16 dlh
Totals $320,000 20,000 dlh 20 dlh 20 dlh
3) The Kaumajet Factory produces two products - small lamps and desk lamps. It has two separate departments - finishing and production. The overhead budget for the finishing department is $550,000, using 500,000 direct labor hours. The overhead budget for the production department is $400,000 using 80,000 direct labor hours. If the budget estimates that a small lamp will require 2 hours of finishing and 1 hours of production, how much factory overhead will be allocated to each unit of small lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours?
4) Stewart Marketing Inc. manufactures two products, A and B. From the following information, determine the overhead from both production departments allocated to each unit of product A if the company uses a multiple department rate system.
Product
Direct Labor
Overhead Hours (dlh) A B
Painting Dept. $248,000 10,000 dlh 16 dlh 4 dlh
Finishing Dept. 72,000 10,000 dlh 4 dlh 16 dlh
Totals $320,000 20,000 dlh 20 dlh 20 dlh
5) It would make sense to use any of the following as an allocation base for calculating factory overhead rates except:
6) Phelan Systems Corporation is estimating activity costs associated with producting disk drives tapes drives, and wire drives. The indirect labor can be traced for four separate activity pools. The budgeted activity cost and activity base information, along with the estimated activity-based information, is provided below.
Procurement $36000 Number of purchased order
Scheduling $240000 Number of production orders
Material handling $48000 Number of moves
Product development $72000 Number of engineering changes
Production $1420000 Machine hours
Disk Drives 4000(# XXXXX purchase orders) 300(# XXXXX production orders) 1400(# XXXXX moves) 10(# XXXXX engineering changes) 2000(machine hours) 2000(# XXXXX units)
Tape drives 2000(# XXXXX purchase orders) 150(# XXXXX production orders) 600(# XXXXX moves) 5(# XXXXX engineering changes) 8000(machine hours) 4000(# XXXXX units)
Wire drive 12000(# XXXXX purchase orders) 800(# XXXXX production orders) 4000(# XXXXX moves) 25(# XXXXX engineering changes) 10000(machine hours) 2500(# XXXXX units)
Determine the activity rate for the procurement per purchase order.
7) The Nite Lite Factory has determined that its budgeted factory overhead budget for the year is $6,750,000 and budgeted direct labor hours are 5,000,000. Using the single plantwide factory overhead rate based on direct labor hours, determine the factory overhead rate for the year.
8) The southwest leather company manufactures leather handbages (H) and moccasins (M). For Simplicity reasons, they have decided to use single plantwide factory overhead rate method to allocate factory overhead. The factory overhead estimated per unit together with materials and direct labor will help determine selling prices. Calculate the amount of factory overhead to be allocated to each unit using direct labor hours.
Handbags =60,000 units 2 hours of direct labor
Moccasins = 40,000 units, 3 hours of direct labor
Total Budgeted factory overhead cost = 360,000
9) Using multiple department factory overhead rates instead of single plant - wide factory overhead rate:
10) Using a Plant-wide factory overhead rate distorts product costs when:
Click here for the solution: Lasso Corp. budgeted $250,000 of overhead cost for 2008
Friday, September 25, 2015
Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours
ACC 560 Week 6 Assignment
E10-4 Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.
Indirect labor $1.00
Indirect materials 0.50
Utilities 0.40
Fixed overhead costs per month are: Supervision $4,000, Depreciation $1,500, and Property Taxes $800. Assume that in July 2008, Raney Company incurs the following manufacturing overhead costs.
Variable Costs Fixed Costs
Indirect labor $8,700 Supervision $4,000
Indirect materials 4,300 Depreciation 1,500
Utilities 3,200 Property taxes 800
Instructions
a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month.
b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours during the month.
c) Comment on your finding
Click here for the solution: Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours
E10-4 Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.
Indirect labor $1.00
Indirect materials 0.50
Utilities 0.40
Fixed overhead costs per month are: Supervision $4,000, Depreciation $1,500, and Property Taxes $800. Assume that in July 2008, Raney Company incurs the following manufacturing overhead costs.
Variable Costs Fixed Costs
Indirect labor $8,700 Supervision $4,000
Indirect materials 4,300 Depreciation 1,500
Utilities 3,200 Property taxes 800
Instructions
a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month.
b) Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours during the month.
c) Comment on your finding
Click here for the solution: Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours
Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data
ACC 560 Week 6 Assignment
E10-7 Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data.
Variable Costs Fixed Costs
Indirect materials $12,000 Supervisory salaries $36,000
Indirect labor 10,000 Depreciation 7,000
Utilities 8,000 Property taxes and insurance 8,000
Maintenance 6,000 Maintenance 5,000
Actual variable costs were: indirect materials $13,800, indirect labor $9,600, utilities $8,700, and maintenance $4,900. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,200. The actual activity level equaled the budgeted level.
All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance.
Instructions
(a) Prepare a flexible manufacturing overhead budget report for the first quarter.
(b) Prepare a responsibility report for the first quarter.
Click here for the solution: Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data
E10-7 Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data.
Variable Costs Fixed Costs
Indirect materials $12,000 Supervisory salaries $36,000
Indirect labor 10,000 Depreciation 7,000
Utilities 8,000 Property taxes and insurance 8,000
Maintenance 6,000 Maintenance 5,000
Actual variable costs were: indirect materials $13,800, indirect labor $9,600, utilities $8,700, and maintenance $4,900. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,200. The actual activity level equaled the budgeted level.
All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance.
Instructions
(a) Prepare a flexible manufacturing overhead budget report for the first quarter.
(b) Prepare a responsibility report for the first quarter.
Click here for the solution: Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data
Sunday, September 6, 2015
Information on Carney Company's fixed overhead costs follows
Fixed Cost Variances
Information on Carney Company's fixed overhead costs follows:
Overhead applied............. $360,000
Actual overhead............... 385,500
Budgeted overhead.......... 369,000
Required:
What are the fixed overhead price and production volume variances?
Click here for the solution: Information on Carney Company's fixed overhead costs follows
Information on Carney Company's fixed overhead costs follows:
Overhead applied............. $360,000
Actual overhead............... 385,500
Budgeted overhead.......... 369,000
Required:
What are the fixed overhead price and production volume variances?
Click here for the solution: Information on Carney Company's fixed overhead costs follows
Tuesday, August 4, 2015
Bubba’s Crawfish Processing Company uses a traditional overhead allocation based on direct labor hours
Bubba’s Crawfish Processing Company uses a traditional overhead allocation based on direct labor hours. For the current year overhead is estimated at $2,250,000 and direct labor hours are budgeted at 415,000 hours. Actual overhead was $2,200,000 and actual direct labor hours worked were 422,000.
(a) Calculate the predetermined overhead rate.
(b) Calculate the overhead applied.
(c) Determine the amount of overhead that is over/underapplied.
Click here for the solution: Bubba’s Crawfish Processing Company uses a traditional overhead allocation based on direct labor hours
(a) Calculate the predetermined overhead rate.
(b) Calculate the overhead applied.
(c) Determine the amount of overhead that is over/underapplied.
Click here for the solution: Bubba’s Crawfish Processing Company uses a traditional overhead allocation based on direct labor hours
Thibodeaux Limousine Corporation is trying to determine a predetermined manufacturing overhead
Thibodeaux Limousine Corporation is trying to determine a predetermined manufacturing overhead. Estimated overhead for the upcoming year is $776,000. Budgeted machine hours are 105,000 hours, and budgeted labor hours are 17,500 hours at a rate of $10.00 per hour. Compute the predetermined overhead rate based on:
(a) Direct labor dollars
(b) Direct labor hours
(c) Machine hours
Click here for the solution: Thibodeaux Limousine Corporation is trying to determine a predetermined manufacturing overhead
(a) Direct labor dollars
(b) Direct labor hours
(c) Machine hours
Click here for the solution: Thibodeaux Limousine Corporation is trying to determine a predetermined manufacturing overhead
Friday, July 31, 2015
Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead
Problem 13-44 Cost-Based Pricing Decision
Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead. Jeremy normally applies a standard markup based on cost of goods sold to arrive at an initial bid price. He then adjusts the price as necessary in light of other factors (e.g., competitive pressure). Last year’s income statement is as follows:
Sales $130,000
Cost of Goods Sold $48,100
Gross Margin $81,900
Selling and Admin Expense $46,300
Operating Income $35,600
1. Calculate the markup that Jeremy will use.
2. What is Jeremy's initial bid price?
Click here for the solution: Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead
Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead. Jeremy normally applies a standard markup based on cost of goods sold to arrive at an initial bid price. He then adjusts the price as necessary in light of other factors (e.g., competitive pressure). Last year’s income statement is as follows:
Sales $130,000
Cost of Goods Sold $48,100
Gross Margin $81,900
Selling and Admin Expense $46,300
Operating Income $35,600
1. Calculate the markup that Jeremy will use.
2. What is Jeremy's initial bid price?
Click here for the solution: Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 of overhead
Sunday, July 19, 2015
Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour
Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour. Last year the company had actual overhead of $898,000 and 75,000 machine hours.
(a) Compute the amount of manufacturing overhead applied.
(b) Compute the amount of over/underapplied overhead.
(c) What is the disposition of the over/under applied overhead?
Click here for the solution: Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour
(a) Compute the amount of manufacturing overhead applied.
(b) Compute the amount of over/underapplied overhead.
(c) What is the disposition of the over/under applied overhead?
Click here for the solution: Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour
Wednesday, July 8, 2015
(Overhead application: Working backward) The Towson Manufacturing Corporation applies overhead on the basis of machine hours
Overhead application: Working backward
The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following divisional information is presented for your review:
Division A Division B
Actual machine hours 22,500 ?
Estimated machine hours 20,000 ?
Overhead application rate $4.50 $5.00
Actual overhead $110,000 ?
Estimated overhead ? $90,000
Applied overhead ? $86,000
Over- (under-) applied overhead ? $6,500
Find the unknowns for each of the divisions.
Click here for the solution: (Overhead application: Working backward) The Towson Manufacturing Corporation applies overhead on the basis of machine hours
The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following divisional information is presented for your review:
Division A Division B
Actual machine hours 22,500 ?
Estimated machine hours 20,000 ?
Overhead application rate $4.50 $5.00
Actual overhead $110,000 ?
Estimated overhead ? $90,000
Applied overhead ? $86,000
Over- (under-) applied overhead ? $6,500
Find the unknowns for each of the divisions.
Click here for the solution: (Overhead application: Working backward) The Towson Manufacturing Corporation applies overhead on the basis of machine hours
For 2013, Omaha Mechanical has a monthly overhead cost formula of $42,900 + $6 per direct labor hour
(Predetermined Overhead Rate) For 2013, Omaha Mechanical has a monthly overhead cost formula of $42,900 + $6 per direct labor hour. The firm’s 2013 expected annual capacity is $78,000 direct labor hours, to be incurred evenly each month. Making one unit of the company product requires 1.5 direct labor hours.
a. Determine the total overhead to be applied per unit of product in 2013.
b. Prepare journal entries to record the application of overhead to Work in process inventory and the incurrence of $128,550 of actual overhead in January 2013, when 6,390 direct labor hours were worked.
c. Given the actual direct labor hours in (b), how many units would you have expected to be produced in January.
Click here for the solution: For 2013, Omaha Mechanical has a monthly overhead cost formula of $42,900 + $6 per direct labor hour
a. Determine the total overhead to be applied per unit of product in 2013.
b. Prepare journal entries to record the application of overhead to Work in process inventory and the incurrence of $128,550 of actual overhead in January 2013, when 6,390 direct labor hours were worked.
c. Given the actual direct labor hours in (b), how many units would you have expected to be produced in January.
Click here for the solution: For 2013, Omaha Mechanical has a monthly overhead cost formula of $42,900 + $6 per direct labor hour
At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account
(Underapplied or overapplied overhead) At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year end follows:
Work in process inventory finished inventory cost of goods sold
Direct material $20,000 $80,000 $120,000
Direct labor $10,000 $40,000 50.000
Factory overhead 20,000 80,000 100,000
Total 50,000 200,000 270,000
a. What predetermined OH rate was used during the year?
b. Provide arguments to be used for deciding whether to prorate the balance in the overhead account at the year end
c. Prorate the overhead account balance based on the relative balances of the appropriate accounts
d. Identify some possible reasons that the company had a debit balance in the overhead account at the end of the year.
Click here for the solution: At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account
Work in process inventory finished inventory cost of goods sold
Direct material $20,000 $80,000 $120,000
Direct labor $10,000 $40,000 50.000
Factory overhead 20,000 80,000 100,000
Total 50,000 200,000 270,000
a. What predetermined OH rate was used during the year?
b. Provide arguments to be used for deciding whether to prorate the balance in the overhead account at the year end
c. Prorate the overhead account balance based on the relative balances of the appropriate accounts
d. Identify some possible reasons that the company had a debit balance in the overhead account at the end of the year.
Click here for the solution: At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account
Monday, July 6, 2015
Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012
Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012. The company expected to operate the department at 100% of normal capacity of 7,000 hours.
Variable Costs:
Indirect factory wages $22,050
Power and light 12,600
Indirect Materials 10,500
Total Variable Cost $45,150
Fixed Costs:
Supervisory salaries $12,000
Depreciation of plant and equipment 31,450
Insurance and property taxes 9,750
Total fixed costs $53,200
Total factory overhead $98,350
During May, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $23,580; power and light, $13,120; indirect materials, $11,310; supervisory salaries, $12,000; depreciation of plant and equipment, $31,450; and insurance and property taxes, $9,750.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,400 hours.
Click here for the solution: Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012
Variable Costs:
Indirect factory wages $22,050
Power and light 12,600
Indirect Materials 10,500
Total Variable Cost $45,150
Fixed Costs:
Supervisory salaries $12,000
Depreciation of plant and equipment 31,450
Insurance and property taxes 9,750
Total fixed costs $53,200
Total factory overhead $98,350
During May, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $23,580; power and light, $13,120; indirect materials, $11,310; supervisory salaries, $12,000; depreciation of plant and equipment, $31,450; and insurance and property taxes, $9,750.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,400 hours.
Click here for the solution: Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012
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