Acctg Ch 2 HW
The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate?
$10.00 per machine hour 1) $300,000 + (50,000 x 4) = 500,000 2) 500,000 / 50,000 = $10 per machine hour
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 43,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $527,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $728,878 and its actual total direct labor was 43,500 hours. Compute the company's plantwide predetermined overhead rate for the year.
$15.26 per DLH 1) $527,000 + (43,000 x 3) = 656,000 2) 656,000 / 43,000 = $15.26 per DLH
Speedy Auto Repairs uses a job-order costing system. The company's direct materials consist of replacement parts installed in customer vehicles, and its direct labor consists of the mechanics' hourly wages. Speedy's overhead costs include various items, such as the shop manager's salary, depreciation of equipment, utilities, insurance, and magazine subscriptions and refreshments for the waiting room. The company applies all of its overhead costs to jobs based on direct labor-hours. At the beginning of the year, it made the following estimates: Direct labor-hours required to support estimated output38,000 Fixed overhead cost$ 589,000 Variable overhead cost per direct labor-hour$ 1.00 Required: 1. Compute the predetermined overhead rate. 2. During the year, Mr. Wilkes brought in his vehicle to replace his brakes, spark plugs, and tires. The following information was available with respect to his job: Direct materials$ 617 Direct labor cost$ 221 Direct labor-hours used 8 Compute Mr. Wilkes' total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 40% of its total job cost, then how much would it have charged Mr. Wilkes?
$16.50 589,000 + (1 x 38,000) = 627,000 627,000 / 38,000 = 16.50 $970 617 + 221 + (8 x 16.50) = 970 $1358 970 x 1.40 = $1358
Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours?
$4,000 Overhead applied to a particular job (200,000 / 10,000) x 200 = $4,000
Mansfield, Incorporated, has two production departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The predetermined overhead rate in the Assembly Department is based on machine hours (MHs) and it is based on direct labor-hours (DLHs) in the Packaging Department. At the beginning of the year, the company made the following estimates: AssemblyPackagingDirect labor-hours5,20062,000Machine-hours68,40011,900Total fixed manufacturing overhead cost$ 390,000$ 419,000Variable manufacturing overhead per DLH $ 3.75Variable manufacturing overhead per MH$ 3.00 Knowledge Check 01 What is the estimated total manufacturing overhead in the Assembly Department? Knowledge Check 02 What is the predetermined overhead rate for the Packaging Department?
$595,200 (68,400 x 3) + 393,000 = $595,200 $10.51 (62,000 x 3.75) + 419000 = 651,500 651,500 / 62,000 = 10.51
Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job? Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?
$6,200 total cost for the job = dm +dl + (ovhead rt x hours) 4,000 + 1,200 + (10 x 100) = $6,200 $124 unit product cost = total product cost / # of units 6,200 / 50 = $124 unit product cost per audio controller
Mickley Company's plantwide predetermined overhead rate is $23.00 per direct labor-hour and its direct labor wage rate is $15.00 per hour. The following information pertains to Job A-500: Direct materials$ 280 Direct labor$ 225 Required: 1. What is the total manufacturing cost assigned to Job A-500? 2. If Job A-500 consists of 50 units, what is the unit product cost for this job?
$850 280 + 225 + (23 x 15) = $850 $17 per unit 850 / 50 = $17
Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 70,000 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $595,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm's actual overhead cost for the year was $615,000 and its actual total direct labor was 77,350 hours. Required: 1. Compute the predetermined overhead rate. 2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job: Direct materials $ 40,050 Direct labor cost $ 29,000 Direct labor-hours worked 290 Compute the total job cost for the Xavier Company engagement.
$9.00 per DLH predetermined overhd rt 1) 595,000 + (70,000 x 0.50) = 630,000 2) 630,000 / 70,000 = $9.00 per DLH $71,660 total job cost 40,050 + 29,000 + (290 x 9) = $71,660
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: Direct labor-hours required to support estimated production 95,000 Machine-hours required to support estimated production47,500 Fixed manufacturing overhead cost$ 266,000 Variable manufacturing overhead cost per direct labor-hour$ 2.60 Variable manufacturing overhead cost per machine-hour$ 5.20 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials$ 273 Direct labor cost$ 237 Direct labor-hours 15 Machine-hours 5 Required: 1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550? 2. Assume that Landen's controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach: a. Compute the plantwide predetermined overhead rate. b. Compute the total manufacturing cost of Job 550. c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?
1) Direct Labor Hours: $5.40 predetermined overhead rt 266,000 + (95,000 x 2.60) = 513,000 513,000 / 95,000 = $5.40 $591 total manufacturing cost of job 273 + 237 + (15 x 5.40) = 591 $1,773 Selling Price w Markup 591 + 2(591) = 1,773 2) Machine Hours: $10.80 predetermined overhd rt 266,000 + (47,500 x 5.20) = 513,000 513,000 / 47,500 = $10.80 $564 total manufacturing cost of job 273 + 237 + (5 x 10.80) = 564 $1,692 Selling Price w Markup 564 + 2(564) = $1,692
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company's two product lines appear below: DeluxeStandardDirect materials per unit$69.00 $57.00 Direct labor per unit$27.00 $22.00 Direct labor-hours per unit 0.70DLHs 1.40DLHsEstimated annual production 10,000units 50,000units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead$667,000 Estimated total direct labor-hours 77,000DLHs Required: 1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools: Expected ActivityActivity Cost Pools (and Activity Measures)EstimatedOverhead CostDeluxeStandardTotalSupporting direct labor (direct labor-hours)$462,0007,00070,00077,000Batch setups (setups) 135,000200100300Safety testing (tests) 70,0003070100Total manufacturing overhead cost$667,000
Traditional: Deluxe: 667,000 / 77,000 = 8.66233766... 69 + 27 + (8.6623.... x 0.70) = $102.06 Standard: 57 + 22 + (8.662... x 1.40) = $91.13 Activity-Based Absorption: DL = 462,000 / 77,000 = 6 per DLH setups = 135,000 / 300 = 450 per setup tests = 70,000 / 100 = 700 per test Deluxe: 6 x 7,000 = 42,000 450 x 200 = 90,000 700 x 30 = 21,000 42,000 + 90,000 + 21,000 = 153,000 69 + 27 + (153,000 / 10,000) = $111.30 Standard: 6 x 70,000 = 420,000 450 x 100 = 45,000 700 x 70 = 49,000 420,000 + 45,000 + 49,000 = 514,000 57 + 22 + (514,000 / 50,000) = $89.28
What is the term used when a company applies less overhead to production than it actually incurs? The adjustment for overapplied overhead ________. When all of a company's job cost sheets are viewed collectively they form what is known as a ________.
Underapplied decreases cost of goods sold and increases net operating income subsidiary ledger
The direct materials required to manufacture each unit of product are listed on a ________.
bill of materials
A normal cost system applies overhead to jobs ________.
by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
Companies can improve job cost accuracy by using ________.
multiple predetermined overhead rates
In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.
total fixed manufacturing overhead cost