Cost Accounting Chapter 2 HW

Speedy Auto Repairs uses a job-order costing system. The companys 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, insurence, 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 estimate: Direct labor-hours required to support estimated output: 20,000 Fixed overhead cost: $350,000 Variable overhead cost per direct labor-hour: $1 -Compute the predetermined overhead rate -during the year, Mr. Wilkes brought in his vehicle to replace his brakes, spark plugs, adn tires. The following information was available with respect to his job: direct materials: $590 direct labor cost: $109 direct labor-hours used: 6 compute Mr. Wilkes total job cost. If speedy establishes its selling prices using a markup percentage of 40% of ts job cost, then how much would it have chraged Mr. Wilkes?

predetermined overhead rate = 18.50 the estimated total overhead cost is computed as follows: Y=$350,000 + ($1.00 per DLH)(20,000 DLHs) estimated fixed overhead:$350,000 estimated variable overhead: -$1.00 per DLH * 20,000 DLHs estimated total overhead cost= $370,000 The predetermined overhead rate is computed as follows: estimated total overhead: $370,000 estimated total direct labor-hours: 20,000 DLHs predetermined overhead rate= (370,000/20,000)= $18.50 per DLH Overhead applied ($18.50 per DLH * 6DLH) = $111 The price charged to Mr Wilkes is computed as follows: Total manufacturing cost: $810 Markup (40%) 324 Selling price: $1,134

Juanita Corporation uses a job-order costing system and applies overrhead on the basis of direct labor cost. At the end of October, Juanita had one job still in process. The job cost sheet for this job contained 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 Juanita have transferred to finished goods inventory in November when it was completed?

$1,730 overhead applied= predetermined overhead * amount of the allocation base incurred $600 = predetermined overhead rate * $150 predetermining overhead rate= $600/$150 = 4.0 direct materials: 480 direct labor: (150+100)=25 manufacturing overhead applied (4.0*250)= 1000 total product cost= $1730

Sargent Corporation applies overhead costs to jobs on the basis of 80% of direct labor cost. if Job 210 shows $10,000 of manufacturing overhead cost applied, how much was the direct labor cost on the job?

$12,500 manufacturing overhead applied = predetermined overhead rate * amount of the allocation base incurred 10,000 = 0.80 *direct labor cost direct labor cost = 10,000/ 0.80 = 12,500

Thach Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $665,000, variable manufacturing overhead of $3.00 per machine-hour, and 70,000 machine-hours. Recently, Job T321 was completed with the following characteristics: number of units in the job: 30 total machine-hours: 90 direct materials: $630 direct labor cost: $2,880 The unit product cost of Job T321 is closest to:

$154.50 Estimated total manufacturing overhead rate cost = estimated total fixed manufacturing overhead cost + (estimated variable overhead cost per unit of the allocation base * estimated total amount of the allocation base) = $665,000 + (3.00 per machine-hour * 70,000 machine-hours) = $665,000 + $210,000 = 875,000 Predetermined overhead rate = estimated total manufacturing overhead cost/ estimated total amount of the allocation base = 875,000/ 70,000 machine-hours = $12.50 per machine-hour Overhead applied to a particular job = predetermined overhead rate * amount of the allocation base incurred by the job = 12.50 per machine-hour * 90 machine-hours = $1,125 direct materials 630 direct labor 2880 manufacturing OH 1125 total cost of Job T321= $4635 total cost of Job T321: 4635 number of units: 30 unit product cost (4635/30)= 154.50

Johansen Corporaion 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 Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be:

$2.50 per direct labor-hour rent on factory building: 15,000 depreciation on factory equipment: 8,000 indirect labor: 12,000 production supervisor's salary: 15,000 manufacturing overhead= $50,000 predetermined overhead rate = estimated total manufacturing overhead cost/ estimated total amount of the allocation base predetermined overhead rate = 50,000/ 20,000 direct labor-hours = 2.50 per direct labor-hour

Camm Corporation has two manufacturing departments--forming and assembly. The company used the following data at the beginning of the year to calculate predetermined overhead rates: estimated total machine-hours (MHs):forming - 3,000; assemly -2,000; total 5000 estimated total fixed manufacturing overhead cost: forming -$12,600; assembly -$4,600; total $17,200 estimated variable manufacturing overhead cost per MH: forming - $1.70; assembly -$2.50 Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. The departmental predetermined overhead rate in the assembly department is closet to:

$4.80 assembly department predetermined overhead rate: estimated fixed manufacturing overhead=$4,600 estimated variable manfacturing overhead ($2.50 per MH * 2,000 MHs)= 5,000 estimated total manufacturing overhead cost= (4,600+5000)= $9,600 estimated total machine-hours=2,000 MHs departmental predetermined overhead rate = (9600/2,000)= $4.80 per MH

Bernson Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $492,000 and 30,000 machine-hours for the period. The company incurred actual total fixed manufacturing overhead of $517,000 and 28,300 total machine-hours during the period. The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:

$464,120 estimated total fixed manufacturing overhead= 492,000 estimated activity level= 30,000 predetermined overhead rate= (492,000/30,000) = 16.40 actual activity level= 28,300 manufacturing overhead applied= (16.40*28,300)= 464,120

The management of garn Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated activity for the coming year. The Corporation's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated activity for the upcoming year is 69,000 machine-hours. Capacity is 85,000 machine-hours. All of the manufacturing overhead of fixed and is $4,105,500 per year within the range of 69,000 to 85,000 machine-hours. If the Corporation bases it predetermined overhead rate on capacity but the actual level of activity for the year turns out to be 69,700 machine-hours, the cost of unused capacity shown on the income statement prepared for internal management purposes would be closest to:

$738,990 Predetermined overhead rate = esetimated total manufacturing overhead at capacity/estimated total amount of the allocation base at capacity = 4,105,500/ 85,000 machine hours = 48.30 per machine-hour actual manufacturing overhead cost incurred- 4,105,500 manufacturing overhead applied to jobs -predetermined overhead rate- 48.30per machine-hour -actual hours 69,700 machine hours -manufacturing overhead applied to jobs- 3,366,510 cost of unused capacity-$738,990

Assigning manufacturing overhead to a specific job is complicated by all of the below:

-manufacturing overhead is a indirect cost that is either impossible or difficult to trace to particular job -manufacturing overhead consists of both variable and fixed costs -the average cost of actual fixed manufacturing overhead expenses will vary depending on how many units are produced in a period

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 OH $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 Dep. B, respectively?

150% and $3.00 Dept. A predetermined overhead rate = Estimated total manufacturing overhead cost/ estimated total amount of the allocation base predetermined overhead rate = 90,000/ 60,000 = 150% of direct labor cost Dept. B predetermined overhead rate = estimated total manufacturing overhead cost/estimated total amount of the allocation base predetermined overhead rate = 45,000/ 15,000 machine-hours = $3.00 per machine-hour

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

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

When the predetermined overhead rate is based on the level of activity at capacity, an item called the cost of unused capacity may appear to be treated as a period expense on income statements prepared for internal management use.

True