Chapter 5 Cengage Homework

Calculating the Predetermined Overhead Rate, Applying Overhead to Production At the beginning of the year, Debion Company estimated the following: Overhead = $823,700 Direct labor hours = 68,000 Debion uses normal costing and applies overhead on the basis of direct labor hours. For the month of March, direct labor hours were 15,640. Required: 1. Calculate the predetermined overhead rate for Debion. Round your answer to the nearest cent. $__________ per direct labor hour 2. Calculate the overhead applied to production in March. If required, round your answer to nearest whole value. $__________

1. $12.11 Predetermined Overhead Rate = Overhead / Direct Labor Hours = $823,700 / 68,000 = $12.11 2. $189,400 Applied Overhead Rate = Predetermined Overhead Rate x Direct Labor Hours in March = $12.11 x 15,640 = $189,400

Calculating the Predetermined Overhead Rate, Applying Overhead to Production, Reconciling Overhead at the End of the Year, Adjusting Cost of Goods Sold for Under- and Overapplied Overhead At the beginning of the year, Horvath Company estimated the following: Overhead = $360,000 Direct labor hours = 90,000 Horvath uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 8,150. By the end of the year, Horvath showed the following actual amounts: Overhead = $366,000 Direct labor hours = 89,600 Assume that unadjusted Cost of Goods Sold for Horvath was $576,000. Required: 1. Calculate the predetermined overhead rate for Horvath. Round your answers to the nearest cent, if rounding is required. $__________ per direct labor hour 2. Calculate the overhead applied to production in January. (Note: Round to the nearest dollar, if rounding is required.) $__________ 3. Calculate the total applied overhead for the year. $__________ Was overhead over- or underapplied? By how much? __________ overhead $__________ 4. Calculate adjusted Cost of Goods Sold after adjusting for the overhead variance. $__________

1. $4 Predetermined Overhead Rate = Estimated Overhead / Estimated Direct Labor Hours = $360,000 / 90,000 = $4 2. $32,600 Overhead Applied to Production in January = Predetermined Overhead Rate x Direct Labor Hours for January = $4 x 8,150 = $32,600 3. a. $358,400 Total Applied Overhead = Predetermined Overhead Rate x Direct Labor Hours for the year = $4 x 89,600 = $358,400 3. b. underapplied Actual Overhead = $366,000 Total Applied Overhead = $358,400 Since the Actual Overhead is more than the Total Applied Overhead, the overhead is underapplied 3. c. $7,600 Actual Overhead - Total Applied Overhead = $366,000 - $358,400 = $7,600 4. Unadjusted Cost of Goods Sold = $576,000 Adjusted Cost of Goods Sold = Unadjusted Cost of Goods Sold + Underapplied Overhead = $576,000 + $7,600 = $583,600

Predetermined Overhead Rate, Overhead Application At the beginning of the year, Ilberg Company estimated the following costs: Overhead = $450,000 Direct labor cost = $600,000 Ilberg Company uses normal costing and applies overhead on the basis of direct labor cost. (Direct labor cost is equal to total direct labor hours worked multiplied by the wage rate.) For the month of December, direct labor cost was $40,900. Required: 1. Calculate the predetermined overhead rate for the year. Enter the percentage answer as a whole number. __________ % of direct labor cost 2. Calculate the overhead applied to production in December. $__________

1. 75% Predetermined Overhead Rate = Estimated Annual Overhead / Estimated Annual Activity Level = 450,000 / $600,000 = 0.75 2. $30,675 Overhead Applied to Production = Predetermined Overhead Rate x Direct Labor Cost in December = 0.75 x $40,900 = $30,675

Prepare Job-Order Cost Sheets, Predetermined Overhead Rate, Ending Balance of Work in Progress, Finished Goods, and Cost of Goods Sold Instructions: At the beginning of June, Rhone Company had two jobs in process, Job 44 and Job 45, with the following accumulated cost information: Type / Job 44 / Job 45 Direct materials / $5,000 / $1,200 Direct labor / $1,700 / $2,900 Applied overhead / $935 / $1,595 --------------------------------------------------- Balance, June 1 / $7,635 / $5,695 During June, two more jobs (46 and 47) were started. The following direct materials and direct labor costs were added to the four jobs during the month of June: Type / Job 44 / Job 45 / Job 46 / Job 47 Direct materials / $2,250 / $7,140 / $1,650 / $1,850 Direct labor / $840 / $6,380 / $960 / $660 At the end of June, Jobs 44, 45, and 47 were completed. Only Job 45 was sold. On June 1, the balance in Finished Goods was zero. Required: 1.Calculate the overhead rate based on direct labor cost. Round to three decimal places. 2.Prepare a brief job-order cost sheet for the four jobs. Show the balance as of June 1 as well as direct materials and direct labor added in June. Apply overhead to the four jobs for the month of June, and show the ending balances. 3.Calculate the ending balances of Work in Process and Finished Goods as of June 30. 4.Calculate the Cost of Goods Sold for June.

1. The overhead rate based on direct labor cost is 55% Using Job 44: Predetermined Overhead Rate = Applied Overhead / Direct Labor Cost = $935 / $1700 x $100 = $55 2. Prepare Job Cost Sheet for 4 Jobs Type / Job 44 / Job 45 / Job 46 / Job 47 Direct Materials / $2,250 / $7,140 / $1,650 / $1,850 Direct Labor / $840 / $6,380 / $960 / $660 Applied Overhead (Direct Labor Cost x 55%) / $840 x 55% = $462 / $6,380 x 55% = $3,509 / $960 x 55% = $528 / $660 x 55% = $363 Beginning Balance / $7,635 / $5,695 / - / - Total, June 30 / $11,187 / $22,724 / $3,138 / $2,873 3. a. Work in Process: $3,138 At the end of June Job 44, 45, 47 were completed and remaining job 46 balance is still working in progress. Therefore Ending Inventory Job 46 = $3,138 3. b. Finished Goods: $14,060 And the remaining three Jobs 44, 45, 47 were completed and transferred to Finished Goods. And later on Job 45 sold. Therefore Cost of Finished Goods Job 44, 47 = $11,187 + $2,873 = $14,060 4. Cost of Goods Sold: $22,724 Only Job 45 sold during the month of June. Therefore Cost of Goods Sold = $22,724

Overhead Variance (Over- or Underapplied), Closing to Cost of Goods Sold At the end of the year, Ilberg Company provided the following actual information: Overhead = $456,500 Direct labor cost = $607,200 Ilberg uses normal costing and applies overhead at the rate of 75% of direct labor cost. At the end of the year, Cost of Goods Sold (before adjusting for any overhead variance) was $933,000. Required: 1. Calculate the overhead variance for the year. $__________ / __________ 2. Dispose of the overhead variance by adjusting Cost of Goods Sold. Adjusted COGS $__________

1. a. $1,100 Overhead Variance for the Year = Actual Overhead - Overhead Applied = $456,500 - ($607,200 x 75%) = $456,500 - $455,400 = $1,100 1. b. underapplied 2. $934,100 Adjusted Cost of Goods Sold = Unadjusted Cost of Goods Sold + Overhead Underapplied = $933,000 + $1,100 = $934,100

Predetermined Departmental Overhead Rates, Applying Overhead to Production At the beginning of the year, Hallett Company estimated the following: Type / Cutting Department / Sewing Department / Total Overhead / $240,000 / $350,000 / $590,000 Direct labor hours / $31,200 / $100,000 / $ 131,200 Machine hours / $150,000 / — / $150,000 Hallett uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. Actual data for the month of June are as follows: Type / Cutting Department / Sewing Department / Total Overhead / $20,610 / $35,750 / $56,360 Direct labor hours / $2,800 / $8,600 / $11,400 Machine hours / $13,640 / — / $13,640 Required: 1. Calculate the predetermined overhead rates for the cutting and sewing departments. Round your answers to the nearest cent. Cutting department $__________ per machine hour Sewing department $__________ per direct labor hour 2. Calculate the overhead applied to production in each department for the month of June. Use overhead application rates that are rounded to the nearest cent in your calculations, and round your final answers to the nearest dollar. Cutting department $__________ Sewing department $__________ 3. By how much has each department's overhead been overapplied or underapplied? Cutting department $__________ / __________ Sewing department $__________ / __________

1. a. $1.60 Predetermined Overhead Rate - Cutting Department = Overhead Costs / Machine Hours = $240,000 / $150,000 = $1.60 1. b. $3.50 Predetermined Overhead Rate - Sewing Department = Overhead Costs / Direct Labor Hours = $350,000 / $100,000 = $3.50 2. a. $21, 824 Overhead Applied - Cutting Department = Overhead Rate x Actual Machine Hours = $1.60 x $13,640 = $21,824 2. b. $30,100 Overhead Applied - Sewing Department = Overhead Rate x Actual Direct Labor Hours = $3.50 x $8,600 = 30,100 3. a. $1,214 Cutting Department = $20,610 - $21,824 = $1,214 3. b. overapplied 3. c $5,650 Sewing Department = $35,750 - $30,100 = $5,650 3. d. underapplied