Managerial Accounting - Chapter 2

Hudson Automotive uses labor-hours as its base for calculating a predetermined overhead rate. Hudson had estimated the labor-hours for the year at 46,000 labor-hours. The estimated variable manufacturing overhead was $6.25 per labor-hour and the estimated total fixed manufacturing overhead was $1,026,260. The actual labor-hours for the year turned out to be 41,200. What was the predetermined overhead rate?

$28.56 Est. VMOH = $6.25/DL Hr x 46,000 DL Hrs = $287,500 Est. MOH = $287,500 + $1,026,260 = $1,313,760 POR = $1,313,760/46,000 DL Hrs = $28.56/DL Hr

Addington Productions is a film studio that uses a job-order costing system. The company's direct materials consists of items such as costumes and props. Its direct labor includes each film's actors, directors, and extras. The company's overhead costs include items such as utilities, depreciation of equipment, senior management salaries, and wages of maintenance workers. Addington applies its overhead cost to films based on direct labor-dollars. At the beginning of the year, Addington made the following estimates: DL-Dollars to support all productions: $8,000,000 Fixed OH Cost: 4,800,000 Variable OH Cost per DL-Dollar: $0.05 During the year, Addington produced a firm titled "What If It All Worked Out" that incurred the following costs: DM: $1,259,000 DL Cost: $2,400,000 What was the total job cost for this firm?

$5,219,000

What is the predetermined overhead rate for the Packaging Department?

$9.61 per DLH

Brooks Bikes is operating at 50% of capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: - Machine-hours required to support estimated production: 165,000 - Fixed manufacturing overhead cost: $1,980,000 - Variable manufacturing overhead cost per machine-hour: $2.00 During the year, bike ABC was started, completed, and sold for $2,500. The following information was available with respect to this bike: - DM: $1,150 - DL Cost: $830 - Machine-hours used: 72 What gross margin did Brooks Bikes earn on the sale of bike ABC?

-488 Est. VMOH = 165,000 x 2 = 330,000 POR = (330,000 + 1,980,000)/165,000 = $14/MHr MOH = $14/MHr x 72 MHrs = $1,008 COGS = (DM + DL + Applied MOH) = $1,150 + $830 + $1,008 = $2,988 GM = Sales - COGS = $2,500 - 2,988 = -$488

Pyles Auto Repairs uses job-order costing. Direct materials consist of replacement parts installed in customer vehicles, and direct labor consists of the mechanics' hourly wages. Overhead costs include various items, such as the shop manager's salary, depreciation of equipment, and refreshments for the waiting room. The company applies overhead 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 output: 20,000 - Fixed overhead cost: $350,000 - Variable overhead cost per direct labor-hour: $1.00 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: - DM: $590 - DL Cost: $109 - DL-Hours Used: 6 If Pyles establishes its selling prices using a markup percentage of 40% of its total job cost, then how much would it have charged Mr. Wilkes?

$1,134 VMOH $ = 20,000 * $1 = $20,000 Total MOH $ = $20,000 + $350,000 = $370,000 POHR = $370,000/20,000 = $18.50/DL Hr Wilkes Job MOH $ = $18.50 * 6 = $111 Wiles Job Total Mfg $ = $590 + $109 + $111 = $810 SP = 1.4 * $810 = $1,134

Mahon Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Casting Customizing Machine-hours 17,600 14,600 DL-hours 6,200 7,300 Total Fixed MOH $88,000 $69,350 Var. MOH per MH $3.00 Var. MOH per DL $5.90 During the current month the company started and finished Job T138. The following data were recorded for this job: Job T138: Casting Customizing Machine Hrs 70 30 DL-Hrs 9 90 The amount of overhead applied in the Customizing Department to Job T138 is closest to: (Round your intermediate calculations to two decimal places.)

$1,386.00 Custom. PDOHR = [69,350 + (5.90 * 7,300)] / 7,300 = $15.40 per direct labor hour MOH Applied in Custom = $15.40 * 90 dlh = $1,386

Young uses a job-order costing system and applies overhead on the basis of direct labor cost. At the end of October, Young had one job in process, with the following information: Direct materials $480 Direct labor $150 Manufacturing overhead applied $600 An additional $100 of labor was needed in November to complete this job. For this job, how much should Young have transferred to finished goods inventory in November when it was completed?

$1,730

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

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 99,000 Total fixed manufacturing overhead cost $544,500 Variable manufacturing overhead per direct labor-hour $2.00 Recently, Job P951 was completed with the following characteristics: Number of units in the job 20 Total direct labor-hours 100 Direct materials $880 Direct labor cost $9,900 The total job cost for Job P951 is closest to: (Round to your intermediate calculations to two decimal places.)

$11,530 PDOHR = [544,500 + (2 * 99,000)] / 99,000 = $7.50 per direct labor hour MOH Applied = 7.50 * 100 = $750 Job Costs = DM + DL Cost + MOH Applied = $880 + 9,900 + 750 = $11,530

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)?

$124

Dowty Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated lathe. Additional information is provided below for the most recent month: Estimates at the beginning of the month: - Estimated total fixed MOH: $19,964 - Capacity of the lathe: 280 hours Actual Results: - Actual total fixed MOH: $19,964 - Actual hours of lathe used: 230 hours The MOH applied is closest to:

$16,399 PDOHR = 19,964 / 280 hours = $71.30 per hour $71.30 per hour * 230 hours = $16,399 MOH Applied

Sargent Corporation applies overhead cost to jobs on the basis of 80% of direct labor cost. If Job 210 shows $20,480 of manufacturing overhead cost applied, how much was the direct labor cost on the job?

$25,600 MOH Applied = DL Cost * PDOHR 20,480 = DLCost * 80% DL Cost = 20,480 / .8 = $25,600

Willis Company assigns overhead cost to jobs on the basis of 125% of direct labor cost. The job cost sheet for Job 313 includes $10,000 in direct materials cost and $12,000 in direct labor cost. A total of 1,000 units were produced in Job 313. What is the unit product cost for Job 313?

$37.00 Total $ = $10,000 + $12,000 + ($12,000 x 1.25) = $37,000 Cost/Unit = $37,000/1,000 unit = $37/unit

Wilson Company has two manufacturing departments—Finishing and Fabrication. The predetermined overhead rates in Finishing and Fabrication are $18.00 per direct labor-hour and 110% of direct materials cost, respectively. The company's direct labor wage rate is $16.00 per hour. The following information pertains to Job 700: Finishing Fabrication DM $410 $60 DL $128 $48 If Job 700 consists of 15 units, what is the unit product cost for this job?

$57.07 Finishing POHR = $18/DL Hrs Job 700 DL Hrs = $128/$16 per DL Hr = 8 DL Hrs Fabrication POHR = 110% of DM Job 700 MOH $ = ($18*8) + (1.10*60) = 144 + 66 = $210 Total Mfg $ = DM + DL + MOH --> $470 + $176 + $210 = $856 Mfg $/unit = $856/15 units = $57.07

What is the estimated total manufacturing overhead in the Assembly Department? Assembly: DL Hours 5,200 Machine-hours 68,400 Total fixed MOH cost $390,000 Variable MOH per MH $3.00 Packaging: DL Hours 62,000 Machine-hours 11,900 Total fixed MOH cost $419,000 Variable MOH per DLH $3,75

$595,200

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

Jones 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 building $ 15,000 Sales salaries $ 25,000 Depreciation on factory equipment $ 8,000 Indirect labor $ 12,000 Production supervisor's salary $ 15,000 Jones estimates that 20,000 direct labor-hours will be worked during the year. What will the predetermined overhead rate per direct labor-hour be?

2.50 Total Est. MOH = $15K + $8 K + $12K + $15K = $50,000 POR = $50,000/20,000 DL Hrs = $2.5/DL Hr

Which of the following would usually be found on a job cost sheet under a normal cost system?

Actual direct material cost: Yes Actual MOH cost: No

In absorption costing, nonmanufacturing costs are assigned to units of product.

False

Which one of the following best describes a job cost sheet?

It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job

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 driver.

Which of the following would be accounted for using a job order cost system?

The construction of a new campus building

Actual overhead costs are not assigned to jobs in a job costing system.

True

Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources.

True

The appeal of using multiple departmental overhead rates is that they presumably provide a more accurate accounting of the costs caused by jobs.

True

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies.

True

The two major steps in the flow of costs are

accumulating and assigning

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

An important feature of a job order cost system is that each job

has its own distinguishing characteristics

The flow of costs in a job order cost system

involves accumulating manufacturing costs incurred and assigning the accumulated costs to work done.

Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

Brooks Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-cost as the allocation base. The company pays its direct laborers $20 per hour. During the year, the company started and completed only two jobs---Job X, which used 20,000 direct labor-hours, and Job Y. The job cost sheets for these two jobs are shown below: Job X: DM ? DL ? MOH Applied ? Total Job Cost $1,300,000 Job Y: DM $230,000 DL $500,000 MOH Applied $800,000 Total Job Cost $1,630,000 What amount of direct materials were charged to Job X?

$260,000

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

Risser Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated jointer. Additional information is provided below for the most recent month: Estimates at the beginning of the month Estimated total fixed manufacturing overhead $14,256 Capacity of the jointer 240 hours Actual results: Sales $62,310 Direct materials $14,100 Direct labor $16,000 Actual total fixed manufacturing overhead $14,256 Selling and administrative expense $8,900 Actual hours of jointer use 220 hours The gross margin that would be reported on the income statement prepared for internal management purposes would be closest to:

$19,142

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

Grib Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The predetermined overhead rates for the year are 200% of direct labor cost for Department A and 50% of direct labor cost for Department B. Job 436, started and completed during the year, was charged with the following costs: Dept. A Dept. B DM $50,000 $10,000 DL ? $60,000 MOH $80,000 ? The total manufacturing cost assigned to Job 436 was:

$270,000 Dept A: MOH Applied = PDOHR * DL Cost 80,000 = 2 * DL Cost 40,000 = DL Cost Dept B: MOH Applied = .5 * 60,000 = 30,000

Comans Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine- hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Milling Custom. Machine-hours 26,000 29,000 DL-hours 11,000 5,000 Total Fixed MOH 153,400 18,500 Var. MOH (mach.) $1.30 Var. MOH (labor) $5.00 During the current month the company started and finished Job A319. The following data were recorded for this job: Job A319: Milling Custom. Machine-hours 70 30 DL-hours 50 60 DM 450 190 DL Cost 580 570 If the company marks up its manufacturing costs by 20% then the selling price for Job A319 would be closest to: (Round your intermediate calculations to two decimal places.)

$3,379

Longobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 38,600 labor-hours. The estimated variable manufacturing overhead was $5.90 per labor-hour and the estimated total fixed manufacturing overhead was $1,093,924. The actual labor- hours for the year turned out to be 35,800 labor-hours. The predetermined overhead rate for the recently completed year was closest to:

$34.24 PDOHR = [1,093,924 + (5.90 * 38,600)] / 38,600 = $34.24 per dlh