ACCOUNTING 3 CHAPTER 4

Wilson Products computes its predetermined overhead rate on the basis of direct labor-hours. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. This job involved production of 50 audio controllers. The company uses a predetermined overhead rate of $10 per direct labor-hour. If Job X23 involved 100 hours of actual direct labor, what is the unit product cost?

124, Unit product cost ($124) = Total product cost ($6,200 ) ÷ Number of units (50)

Royal Island Inc. had only one job in process during the year. Based on the information provided calculate the adjusted cost of goods sold, using the indirect method.

156200

During the year, Maple Company produced 3,000 tables under Job BC35. The unit product cost of these units was $150. By the end of the year, Maple had shipped 2,300 of these tables. Manufacturing overhead was overapplied by $500. Using the direct method, what is the cost of goods sold for the year?

344500

What is the total amount of manufacturing cost assigned to Job Q as of the end of March (including applied overhead)?

Drect Materials --- 8400 Direct Labor Cost --- 10500 Overhead --- 4480 Total Costs = 23380 Total Cost assigned to Job Q is 23380

Overapplied or underapplied overhead is adjusted to raw materials purchased to arrive at the actual cost of goods sold. True False

FALSE

The manufacturing overhead applied to any job is the actual amount of overhead caused by the job.

False, Actual overhead costs are not assigned to jobs—if that could be done, the costs would be direct costs, not overhead.

WHAT IS THE PREDETERMINED RATE Estimated total fixed manufacturing overhead $ 12,000 Estimated variable manufacturing overhead per direct labor-hour $ 1.40 Estimated total direct labor-hours to be worked 2,400 Total actual manufacturing overhead costs incurred $ 15,000

Predetermined OH Rate = Estimated Fixed OH / (Estimated Direct Labor hours + Variable OH Rate per hour) 12000/2400 + 1.40 =6.40

What is the customer margin for Denny Corporation? What conclusion can you draw from this information?

$(900) = $9,000 Sales - $1,800 Direct Materials - $1,350 Direct Labor - $6,750 Overhead. Denny Corporation is unprofitable with a negative customer margin of $900. This customer margin computed is a starting point for further analysis.

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. First, the estimated total overhead cost = $300,000 + ($4 per MH x 50,000 MHs) = $500,000. Then, the predetermined overhead rate = estimated total overhead cost of $500,000 ÷ 50,000 MHs = $10 per MH.

What is the product margin for Product A?

$140,000

The adjusted cost of goods sold using the direct method was $148,450. The overapplied overhead was determined to be $1,050 and the cost of goods manufactured was $145,000. What will be the adjusted cost of goods sold under the indirect method, if the beginning finished goods inventory was worth $4,500 and there was no ending finished goods inventory?

$148,450

If Job P includes 30 units, what is its unit product cost?

Calculate the unite product cost: Direct Materials --- 15,000 Direct Labor --- 22500 Overheads --- (6.40*1500) = 9600 Total Cost = 47100 Number of units = 30 Cost per unit = 1570

WHAT IS THE AMOUNT OF UNDER-APPLIED OR OVER APPLIED OVERHEAD?

Company's predetermined overhead rate = 6.40 Manufacturing overhead applied to Job P = 9600 Manufacturing overhead applied to Job Q = 4480 Total Manufacturing Overhead = 9600+4480 = 14080 Total actual manufacturing overhead costs incurred = 15000 Underapplied overhead = total actual manufacturing overhead costs incurred - total manufacturing overhead was applied Underapplied overhead = 15000-14080=920

12. Calculate the cost of goods sold using the indirect method

Cost of Good sold Beginning Finished Goods Inventory $0 Add: Cost of Goods Manufactured $47100 Cost of Goods available for sale $47100 Less: Ending Finished Goods Inventory 0 Unadjusted Cost of good sold $47100 Add: underapplied overhead 15000-14080=920 Adjusted Cost of Good sold $48020

What is the direct labor hourly wage rate?

Direct Labor hourly wage rate = (Direct labor cost / Actual direct labor-hours worked) P: 22500/1500=15 Q:10500/700=15

10Calculate the cost of goods sold using the direct method.

Direct Material $15,000 Direct labor cost 22500 Manufacturing overhead (1500*6.4) 9600 Unadjusted Cost of Good sold (for Job P) 47100 Add: underapplied overhead 15000-14080=920 Adjusted Cost of Good sold 48020

Will your answer to question 6 increase or decrease unadjusted cost of goods sold?

INCREASE

How much manufacturing overhead was applied to Job P and Job Q?

Manufacturing OH applied to Job P = (Predetermined OH rate X Actual direct labor-hours worked) p- 6.40*1500=9600 Q- 6.40*700=4480

If Sweeten Company requisitioned $26,200 from raw materials inventory during March, then how much indirect materials cost would be included in Manufacturing Overhead Incurred?

Material Requisitioned -Direct material used 26200-15000-8400=2800

overhead is deducted from cost of goods sold to close it

OVER APPLIED

11. Calculate the cost of goods manufactured using the indirect method.

Schedule of Cost of Good manufactured Beginning WIP $0 Add: Material used 23400 Direct labor 33000 Manufacturing overhead 6.4*(1500+700) Total manufacturing cost Total cost of WIP $70480 Less: ending WIP (8400+10500+(700*5.5)) 23380 Cost of Good manufactured $47100

9. If Sweeten Company's labor time tickets totaled $37,300 for the month of March, then how much indirect labor cost would be included in Manufacturing Overhead Incurred?

Total wages-Direct wages in both jobs 37300-22500-10500=4300

is added to cost of goods sold to close it.

UNDER APPLIED

Which of the following is not a manufacturing cost category?

cost of goods sold Direct labor Direct materials Manufacturing overhead

traced to particular product

direct material direct labor

To compute cost of goods sold using the direct method, we multiply the number of units sold by the predetermined overhead rate.

false

Completed goods that have not yet been sold.

finished goods inventory

cost are transfered to cost of goods sold when

goods are sold

15. Assume that Job P includes 30 units that each sell for $2,400 and that the company's selling and administrative expenses in March were $21,000. Prepare an absorption costing income statement for March.

sales 72000 COGS (48020) gross margin 23980 selling and administrative expenses (21000) net operating income 2980

Cost of goods sold that appears on the income statement is adjusted for differences between the actual and applied manufacturing overhead.

true

Spartan Corporation estimates $200,000 as its total manufacturing overhead for 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).

Wilson Products computes its predetermined overhead rate on the basis of direct labor-hours. Direct material and direct labor associated with Job X23 are $4,000 and $1,200 respectively. The company uses a predetermined overhead rate of $10 per direct labor-hour. If Job X23 involved 100 hours of actual direct labor, what is the total cost associated with the job?

6200, Total cost associated with the job is $6,200 (Direct material ($4,000) + Direct labor ($1,200) + Manufacturing overhead ($1,000) = $10 × 100 DLH)).

Georgia Ltd. had only one job in process during the year. The cost data relating to the job is provided. Calculate the cost of goods manufactured.

75000

How would you revise your answer to question 12 if the company had beginning finished goods inventory of $12,400?

Cost of Good sold Beginning Finished Goods Inventory $12,400 Add: Cost of Goods Manufactured $47100 Cost of Goods available for sale 47100 Less: Ending Finished Goods Inventory 0 Unadjusted Cost of good sold 59500 Add: underapplied overhead 15000-14080=920 Adjusted Cost of Good sold $60420

13. How would you revise your answer to question 11 if the company had beginning work in process inventory of $8,400?

Schedule of Cost of Good manufactured Beginning WIP $8400 Add: Material used 23400 Direct labor 33000 Manufacturing overhead 6.4*(1500+700) 14080 Total manufacturing cost Total cost of WIP 78880 Less: ending WIP (8400+10500+(700*5.5)) 23380 Cost of Good manufactured $55500