Managerial Accounting - Chapter 2

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 * 300,000 + (4 x 50,000) = 500,000 500,000 / 50,000 MHs = $10 per MH

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 47,000 Total fixed manufacturing overhead cost $202,100 Variable manufacturing overhead per direct labor-hour $2.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 50 Total direct labor-hours 100 Direct materials $850 Direct labor cost $4,700 The unit product cost for job p951 is closest to?

$123.60 *$202,100 + ($2.00 x 47,000) = $296,100 $296,100 / 47,000 = $6.30 $6.30 x 100 = $630 $850 + $4,700 + $630 = $6,180 $6,180 / 50 units = $123.60

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 product 50 audio controllers, what is the job's unit product cost (per controller)?

$124 * 4,000 + 1200 + ($10 x 100 DLHs) = 6200 6200 / 50 units = $124

Giannitti Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appears below: Estimated machine hours: 72,100 Estimated variable manufacturing overhead: $3.50 per machine hour Estimated total fixed manufacturing overhead: $838,780 The predetermined overhead rate for the recently completed year was closest to:

$15.13 per machine hour * $838,780 + ($3.50 x 72,100) = 1,091,130 1,091,130 / 72,100 = $15.13

Baj Corporation uses a predetermined overhead rate based on machine hours that is recalculates at the beginning of each year. The company considers all of its manufacturing overhead costs to be fixed and it has provided the following data for the most recent. Estimated total fixed manufacturing overhead from the beginning of the year - $534,000 Estimated activity level from the beginning of the year - 30,000 machine hours Actual total fixed manufacturing overhead - $487,000 Actual activity level - 27,400 machine hours The predetermined overhead rate per machine hour would be closest to?

$17.80 * $534,000 / $30,000 = 17.8

Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year, it was estimated that 34,000 direct hours would be required for the period's estimated level of production. The company also estimated $572,000 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 $739,112 and its actual total direct labor was 34,500 hours. Compute the company's plant-wide predetermined overhead rate for the year:

$19.82 per DLH * 572,000 + (3.00 x 34,000) = 674,000 674,000 / 34,000 = 19.82

Johansson Corporation uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The corporation has provided the following estimated costs for the next year: Direct materials: $6,000 Direct labor: $20,000 Rent on factory buildings $15,000 Sales salaries: $25,000 Depreciation on factory equipment: $8,000 Indirect labor: $12,000 Production supervisor salary: $15,000 Johansson estimates that 20,000 direct labor hours will be worked during the year. The predetermined overhead rate per hour will be:

$2.50 * 15,000 + 8,000 + 12,000 + 15,000 = 50,000 50,000 / 20,000 DLH = $2.50

Luthan Company uses a plantwide predetermined overhead rate of $23.90 per direct labor hour. This predetermined rate was based on a cost formula that estimated $286,800 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor hours. The company incurred an actual total manufacturing overhead cost of $269,000 and 11,800 total direct labor hours during the period. Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period.

$282,020 * $23.90 x 11,800

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 * 200,000 / 10,000 = 20 20 x 200 = $4,000

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?

$6,200 * 4,000 + 1,200 + ($10 x 100 DLHs) = $6,200

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours 52,000 Total fixed manufacturing overhead cost $291,200 Variable manufacturing overhead per direct labor-hour $5.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $780 Direct labor cost $5,200 The total job cost for Job P951 is closest to: (Round your intermediate calculations to 2 decimal places.)

$7,040 * $291,200 + ($5.00 x 52,000) = $551,200 $551,200 / 52,000 = $10.60 $10.60 x 100 = $1,061 $780 + $5,200 + $1,060 = $7,040

Job 910 was recently completed. The following data have been recorded on its job cost sheet: Direct materials: $2,431 Direct labor hours: 70 hours Direct labor wage rate: $22 per labor hour Machine hours: 139 hours The corporation applied manufacturing overhead on the basis of machine hours. The predetermined overhead rate $23 per machine hour. The total cost that would be recorded on the job cost sheet for job 910 would be:

$7,168 * $2,431 +$1,540 ( 70 hours x $22) +$3,197 ( 139 hours x $23) =$7,168

Beat Corporation uses a job-order costing system plantwide predetermined overhead rate based on machine hours. The company based its predetermined overhead rate for the current year on the following data: Total machine hours: 40,000 Total fixed manufacturing overhead cost: $344,000 Variable manufacturing overhead per machine hour: $3.90 Recently, job M759 was completed. It required 60 machine hours. The amount of overhead applied to job M759 is closest to:

$750 * $344,000 + ($3.40 x 40,000) = $500,000 $500,000 / $40,000 = $12.50 12.50 X 60 hours = $750

Fickle company has two manufacturing departments - assembly and testing and packaging. The predetermined overhead rates in assembly and testing and packaging are $30 per direct labor hour and $26 per direct labor hour, respectively. The company's direct labor wage rate is $32 an hour. The following info pertains to the job: Direct materials: Assembly-$430 & Testing and packaging-$61 Direct labor: Assembly-$432 & Testing and packaging-$144 1. what is the total manufacturing cost assigned to the job? 2. if the job consists of 10 units, what is the product cost for the job?

1. $1,589 * assembly: 432 / 32 =13.5 testing and packaging: 144 / 32 = 4.5 (430 + 61) + (432 +144) + [(13.5 x 30) + (4.5 x 26)] = $1,589 2. $158.9 per unit * $1,589 / 10 units

Newhart Company assigns overhead costs to jobs on the basis of 115% of direct labor cost. The job cost sheet for job 313 includes $20,755 in direct materials cost and $10,300 in direct labor costs. A total of 1,300 units were produced in job 313. 1. what is the total manufacturing cost assigned to the job? 2. what is the unit product cost for the job?

1. $42,900 * 20,755 + 10,300 + (10,300 x 1.15) 2. $33 * 42,900 / 1,330

Mickley Company's predetermined overhead rate is $20.00 per direct labor-hour and its direct labor wage rate is $16.00 per hour. The following information pertains to Job A-500: Direct materials $290 Direct labor $80 1. What is the total manufacturing cost assigned to Job A-500? 2. If the job consists of 50 units, what is the unit product cost for the job?

1. $470 * $80 / $16 = 5 5 x $20 = 100 290 + 80 + 100 = $470 2. $9.40 per unit * 470 / 50

The Silver Corporation uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours in Dept. B. At the beginning of the year, the Corporation made the following estimates: ------------------------Dept. A------------Dept. B Direct labor cost ----$60,000-----------$40,000 Manufacturing overhead $90,000-------$45,000 Direct labor-hours----- 6,000 -------------9,000 Machine-hours ---------2,000 -------------15,000 What predetermined overhead rates would be used in Dept. A and Dept. B, respectively?

Dept A: 150% * $90,000 / $60,000 = 1.5 1.5 x 100 = 150% Dept B: $3.00 * $45,000 / $15,000 = $3.00

Which of the following statements about using a plantwide overhead rate based on direct labor is correct?

It is often overly simplistic and incorrect to assume that direct labor hours is a company's only manufacturing overhead cost drive

In a job order costing system that is based on machine hours, which is correct?

Predetermined overhead rate = estimated manufacturing rate / estimated machine hours

What is the term used when a company applies less overhead to production than is actually incurs:

Underapplied

A normal cost system applied overhead to jobs _______

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

Adjustment for overapplied overhead:

decreases cost of goods sold and increases net operating income.

Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

When all of a company's job cost sheets are viewed collectively they form what is known as a ________.

subsidiary ledger