exam 1 account practice problems
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? $6.00 per machine hour. $8.00 per machine hour. $10.00 per machine hour. $12.50 per machine hour.
$10.00 per machine hour Estimated total overhead cost = $300,000 + ($4 per MH × 50,000 MHs) = $500,000 Predetermined overhead rate = Estimated total overhead cost of $500,000 ÷ 50,000 MHs = $10 per MH
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)? multiple choice $52 $62 $100 $124
$124 Total cost associated with the job = Direct material + Direct labor + Manufacturing overhead applied Total cost associated with the job = $4,000 + $1,200 + ($10 × 100 DLHs) = $6,200 Unit product cost = Total cost associated with the job ÷ Number of units Unit product cost = $6,200 ÷ 50 Units = $124
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? multiple choice $2,000 $4,000 $6,000 $10,000
$4,000 Predetermined overhead rate = $200,000 ÷ 10,000 DLHs = $20 per DLH For 200 DLHs, the manufacturing overhead that would be applied is = $20 per DLH × 200 DLHs = $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? multiple choice $5,000 $5,200 $6,000 $6,200
$6,200 Total cost associated with the job = Direct material + Direct labor + Manufacturing overhead applied Total cost associated with the job = $4,000 + $1,200 + ($10 × 100 DLHs) = $6,200
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 140,000 Machine-hours required to support estimated production 70,000 Fixed manufacturing overhead cost $784,000 Variable manufacturing overhead cost per direct labor-hour $2.00 Variable 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 $175 Direct labor cost $225 Direct labor-hours 15 Machine-hours 5 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?
1. Direct labor-hours: 1a. Predetermined overhead rate $7.60vper DLH 1b. Total manufacturing cost of Job 550 $514 1c. Selling price$1,542 2. Machine-hours: 2a. Predetermined overhead rate $15.20 per MH 2b. Total manufacturing cost of Job 550 $476 2c. Selling price $1,428 Explanation 1.a. The estimated total overhead cost is computed as follows: Y = $784,000 + ($2.00 per DLH)(140,000 DLHs) Estimated fixed manufacturing overhead$ 784,000Estimated variable manufacturing overhead:$2.00 per DLH × 140,000 DLH280,000Estimated total manufacturing overhead cost$ 1,064,000 The predetermined overhead rate is computed as follows: Estimated total manufacturing overhead (a)$ 1,064,000 Estimated total direct labor-hours (b)140,000DLHPredetermined overhead rate (a) ÷ (b)$ 7.60per DLH b. Total manufacturing cost assigned to Job 550: Direct materials $175 Direct labor 225 Manufacturing overhead applied($7.60 per DLH × 15 DLH) 114 Total manufacturing cost of Job 550 $514 c. The selling price for Job 550 is computed as follows: Job 550Total manufacturing cost$ 514 Markup (200%) 1,028 Selling price$ 1,542 2.a. The estimated total overhead cost is computed as follows: Y = $784,000 + ($4.00 per MH)(70,000 MHs) Estimated fixed manufacturing overhead$ 784,000 Estimated variable manufacturing overhead: $4.00 per MH × 70,000 MHs = 280,000 Estimated total manufacturing overhead cost $1,064,000 The predetermined overhead rate is computed as follows: Estimated total manufacturing overhead (a)$ 1,064,000 Estimated total machine-hours (b) 70,000MHs Predetermined overhead rate (a) ÷ (b) $ 15.20per MH b. Total manufacturing cost assigned to Job 550: Direct materials$ 175 Direct labor 225 Manufacturing overhead applied($15.20 per MH × 5 MH) 76 Total manufacturing cost of Job 550$ 476 c. The selling price for Job 550 is computed as follows: Total manufacturing cost$ 476 Markup (200%) 952 Selling price$ 1,428
Braverman Company has two manufacturing departments—Finishing and Fabrication. The predetermined overhead rates in Finishing and Fabrication are $20.00 per direct labor-hour and 120% of direct materials cost, respectively. The company's direct labor wage rate is $26.00 per hour. The following information pertains to Job 700: Finishing || Fabrication Direct materials$ 460 || $85 Direct labor$ 390 || $286 Required: 1. What is the total manufacturing cost assigned to Job 700? 2. If Job 700 consists of 20 units, what is the unit product cost for this job?
1. Total manufacturing cost $1,623 2. Unit product cost $81.15 per unit Direct labor cost (a)$ 390 Direct labor wage rate per hour (b)$ 26 Total direct labor hours (a) ÷ (b)15 The total manufacturing cost and unit product cost for Job 700 is computed as follows: Direct materials ($460 + $85) $ 545 Direct labor ($390 + $286) 676 Finishing Department ($20 per DLH × 15 DLHs) $300 Fabrication Department (120% × $85) 102402 Total manufacturing cost $ 1,623* Total manufacturing cost (a) $ 1,623 Number of units in the job (b) 20 Unit product cost (rounded) (a) ÷ (b) $ 81.15*
Mansfield, Incorporated, 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: Assembly || Packaging Direct labor-hours 5,200 || 62,000 Machine-hours 68,400 || 11,900 Total fixed manufacturing overhead cost $390,000 || $419,000 Variable manufacturing overhead per DLH $3.75 Variable manufacturing overhead per MH $3.00 Knowledge Check 01 What is the estimated total manufacturing overhead in the Assembly Department? multiple choice $595,200 Correct $651,600 $809,000 $1,246,700 Knowledge Check 02 What is the predetermined overhead rate for the Packaging Department? multiple choice 2 $8.70 per DLH $9.61 per DLH $10.51 per DLH $18.28 per DLH
Check 1: $595,200 Estimated total manufacturing overhead = $390,000 + ($3.00 per MH × 68,400 MHs) = $595,200 Check 2: $10.51 per DLH Estimated total manufacturing overhead = $419,000 + ($3.75 per DLH × 62,000 DLHs) = $651,500 Predetermined overhead rate = $651,500 ÷ 62,000 DLHs = $10.51 per DLH
Speedy Auto Repairs uses a job-order costing system. The company's 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, insurance, 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 estimates: Direct labor-hours required to support estimated output 50,000 Fixed overhead cost $925,000 Variable overhead cost per direct labor-hour $1.00 Required: 1. Compute the predetermined overhead rate. 2. During the year, Mr. Wilkes brought in his vehicle to replace his brakes, spark plugs, and tires. The following information was available with respect to his job: Direct materials$ 619Direct labor cost$ 254Direct labor-hours used6 Compute Mr. Wilkes' total job cost. 3. If Speedy establishes its selling prices using a markup percentage of 60% of its total job cost, then how much would it have charged Mr. Wilkes?
Required 1 Predetermined overhead rate $19.50 per DLH Required 2 Direct materials $619 Direct labor 254 Overhead applied 117 Total cost assigned to Mr. Wilkes $990 Required 3 Amount charged to Mr. Wilkes $1,584 Explanation 1. The estimated total overhead cost is computed as follows: Y = $925,000 + ($1.00 per DLH)(50,000 DLHs) Estimated fixed overhead $925,000 Estimated variable overhead:$1.00 per DLH × 50,000 DLHs 50,000 Estimated total overhead cost $975,000 The predetermined overhead rate is computed as follows: Estimated total overhead (a)$ 975,000 Estimated total direct labor-hours (b)50,000 DLHs Predetermined overhead rate (a) ÷ (b) = $19.50 per DLH 2. Overhead applied ($19.50 per DLH × 6 DLH) = $117 3. The price charged to Mr. Wilkes is computed as follows: Total manufacturing cost $990 Markup (60%) = 594 Selling price$ 1,584
Selected T-accounts of Moore Company are given below for the just completed year: Raw Materials Debit || Credit Balance 1/1 27,000 || Credits? Debits 144,000 Balance 12/31 37,000 Manufacturing Overhead Debit || Credit Debits 197,480 || Credits? Work in Process Debit || Credit Balance 1/1 32,000 || Credits 506,000 Direct materials 102,000 Direct labor 186,000 Overhead 219,480 Balance 12/31 ? Factory Wages Payable Debit || Credit Debits 209,000 || Balance 1/1 15,000 ||Credits 204,000 || Balance 12/31 10,000 Finished Goods Debit || Credit Balance 1/1 52,000 || Credits? Debits? Balance 12/31 78,000 Cost of Goods Sold Debit || Credit Debits? Required: 1. What was the cost of raw materials used in production during the year? 2. How much of the materials in (1) above consisted of indirect materials? 3. How much of the factory labor cost for the year consisted of indirect labor? 4. What was the cost of goods manufactured for the year? 5. What was the unadjusted cost of goods sold for the year? Do not include any underapplied or overapplied overhead in your answer. 6. If overhead is applied to production on the basis of direct labor cost, what predetermined overhead rate was in effect during the year? 7. Was manufacturing overhead underapplied or overapplied? By how much? 8. Compute the ending balance in Work in Process. Assume that this balance consists entirely of goods started during the year. If $11,000 of this balance is direct labor cost, how much of it is direct materials cost? Applied overhead cost?
Required 1-5 1. Cost of raw materials $134,000 2. Indirect materials $32,000 3. Indirect labor cost $18,000 4. Cost of goods manufactured $506,000 5. Unadjusted cost of goods sold $480,000 Required 6 The predetermined overhead rate was 118% of direct labor cost Required 7 Manufacturing overhead was overapplied by$22,000 Required 8 Ending balance in the work in process $33,480 Direct materials cost $9,500 Applied overhead cost $12,980 Explanation 1. The cost of raw materials used in production was: Beginning raw materials inventory $27,000 Add: Purchases of materials (debits)144,000 Total raw materials available 171,000 Deduct: Ending raw materials inventory 37,000 Raw materials used in production$ 134,000 2. Of the $134,000 in materials requisitioned for production, $102,000 was debited to work in process as direct materials. Therefore, the difference of $32,000 was debited to Manufacturing Overhead as indirect materials. 3. Total factory wages accrued during the year (credits to the factory wages payable account) $204,000 Less direct labor cost (from work in process) 186,000 Indirect labor cost$ 18,000 4. The cost of goods manufactured was $506,000—the credits to the work in process account. 5. The Cost of Goods Sold for the year was: Beginning finished goods inventory $52,000 Add: Cost of goods manufactured (from Work in Process)506,000 Cost of goods available for sale 558,000 Deduct: Ending finished goods inventory 78,000 Cost of goods sold $480,000 6. The predetermined overhead rate was: Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total amount of the allocation base = $219,480 / $186,000 direct labor cost = 118% of direct labor cost 7. Manufacturing overhead was overapplied by $22,000, computed as follows: Actual manufacturing overhead cost for the year (debits to Manufacturing Overhead) $197,480 Manufacturing overhead applied (debits to Work in Process) 219,480 Overapplied overhead $(22,000) 8. The ending balance in work in process is $33,480. Direct materials make up $9,500 of this balance, and applied overhead makes up $12,980. The computations are: Balance, work in process, 12/31 $33,480 Less: Direct labor cost (given) 11,000 Applied overhead cost ($11,000 × 118%) 12,980 Direct materials cost (remainder)$ 9,500
White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates: Department Cutting || Finishing Direct labor-hours 7,900 || 86,000 Machine-hours 55,300 || 1,800 Total fixed manufacturing overhead cost$ 360,000 || $420,000 Variable manufacturing overhead per machine-hour $2.00 — Variable manufacturing overhead per direct labor-hour — $2.75 Required: 1. Compute the predetermined overhead rate for each department. 2. The job cost sheet for Job 203, which was started and completed during the year, showed the following: Department Cutting || Finishing Direct labor-hours 512 Machine-hours 873 Direct materials $720 || $370 Direct labor cost $100 || $240 Using the predetermined overhead rates that you computed in requirement (1), compute the total manufacturing cost assigned to Job 203. 3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates? Y/N
Required 1. Cutting Department || Finishing Department Predetermined overhead rate $8.51 per MH || $7.64 per DLH Required 2. Total manufacturing cost $2,261.03 Required 3. Yes Explanation 1. Cutting Department: The estimated total manufacturing overhead cost in the Cutting Department is computed as follows: Y = $360,000 + ($2.00 per MH)(55,300 MHs) Estimated fixed manufacturing overhead $360,000 Estimated variable manufacturing overhead $2.00 per MH × 55,300 MHs = 110,600 Estimated total manufacturing overhead cost $470,600 The predetermined overhead rate is computed as follows: Estimated total manufacturing overhead (a)$ 470,600 Estimated total machine-hours (b) 55,300MHs Predetermined overhead rate (a) ÷ (b)$ 8.51per MH Finishing Department: The estimated total manufacturing overhead cost in the Finishing Department is computed as follows: Y = $420,000 + ($2.75 per DLH)(86,000 DLHs) Estimated fixed manufacturing overhead$ 420,000 Estimated variable manufacturing overhead $2.75 per DLH × 86,000 DLHs = 236,500 Estimated total manufacturing overhead cost$ 656,500 The predetermined overhead rate is computed as follows: Estimated total manufacturing overhead (a)$ 656,500 Estimated total direct labor-hours (b)86,000DLHs Predetermined overhead rate (a) ÷ (b)$ 7.63per DLH 2. Total manufacturing cost assigned to Job 203: Direct materials ($720 + $370) = $ 1,090.00 Direct labor ($100 + $240) = 340.00 Cutting Department (87 MHs × $8.51 per MH) = $740.37 Finishing Department (12 DLH × $7.63 per DLH) = 91.56831.93 Total manufacturing cost $ 2,261.93 3. Yes; if some jobs require a large amount of machine time and a small amount of labor time, they would be charged substantially less overhead cost if a plantwide overhead rate based on direct labor hours were used. It appears, for example, that this would be true of Job 203 which required considerable machine time to complete, but required a relatively small amount of labor hours.
