CH 02 ACCT-2302

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. 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? 2. 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)?

1. $6200 2. $124

Mansfield, Inc., 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: 1. What is the estimated total manufacturing overhead in the Assembly Department? 2. What is the predetermined overhead rate for the Packaging Department?

1. Assembly: Overhead= fixed overhead + variable overhead Overhead= 390,000 + 68,400*3= $595,200 2. Packaging: Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base Estimated manufacturing overhead rate= (419,000/62,000) + 3.75= $10.51

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?

4000, The predetermined overhead rate is $20 ($200,000 ÷ 10,000 DLHs). For 200 DLHs, the manufacturing overhead that would be applied is $4,000 ($20 × 200 DLHs).

Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 80,000 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $680,000 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 $692,000 and its actual total direct labor was 83,000 hours. 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 $ 38,000Direct labor cost $ 21,000Direct labor hours worked 280 TABLE: DIRECT MATS: 38000 DIRECT LABOR COST: 21000 DIRECT LABOR-HOURS WORKED:280

Predetermined OH rate: variable OH x actual total DL = $.50 x 83,000 = 41,500 41,500 + estimated fixed OH = 41,500 + 680,000 = 721,500 estimated OH = $721,500 Predetermined OH rate = 721,500 / 80,000 = $9 / DLH OH = 280 x $9 = 2520

The direct materials required to manufacture each unit of product are listed on a

bill of materials

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 140,000Machine-hours required to support estimated production 70,000Fixed manufacturing overhead cost$784,000Variable manufacturing overhead cost per direct labor-hour$2.00Variable manufacturing overhead cost per machine-hour$4.00 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials$175Direct labor cost$225Direct labor-hours 15Machine-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?

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