1. Conversion cost is the sum of direct labor cost and direct materials cost. F
2. Depreciation on office equipment would be included in product costs. F
3. When the predetermined overhead rate is based on direct labor-hours, the amount of overhead applied to a job is proportional to the estimated amount of direct labor-hours for the job. F
4. Indirect materials are charged to specific jobs. F
5. When a job is completed, the goods are transferred from the production department to the finished goods warehouse and the journal entry would include a debit to Work in Process. F
6. If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead cost applied, then manufacturing overhead would be considered to be
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At the end of the year, actual direct labor-hours for the year were 16,700 hours and the actual manufacturing overhead for the year was $336,890. Overhead at the end of the year was:
$22,920 underapplied
$17,920 overapplied
$17,920 underapplied
$22,920 overapplied
27. Galbraith Corporation applies overhead cost to jobs on the basis of 70% of direct labor cost. If Job 201 shows $28,000 of manufacturing overhead applied, the direct labor cost on the job was:
$40,000
$19,600
$28,000
$36,400
28. Donham Corporation had $25,000 of raw materials on hand on May 1. During the month, the Corporation purchased an additional $65,000 of raw materials. During May, $66,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total:
$0
$62,000
$65,000
$66,000
29.
D
30.
Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the manufacturing overapplied or underapplied for the year?
$12,000 overapplied
$12,000 underapplied
$3,000 overapplied
$3,000 underapplied
31. Hudek Inc., a manufacturing Corporation, has provided the following data for the month of July. The
The current cost system allocates overhead costs once a year, as a function of direct labor dollars. This allocation strategy results in:
14. If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?
2. What is the total cost? How much of the total cost are labor costs? Capital costs?
Only the incremental costs and benefits are relevant. In particular, only the variable manufacturing overhead and the cost of the special tool are relevant overhead costs in this situation. The other manufacturing overhead costs are fixed and are not affected by the decision.
if overapplied overhead is closed out to cost of goods sold will cost of goods sold be increased or decreased
Company Wide Overhead Rate equal Forecast Overhead divided by Expected Machine Hours Overhead Rate equal $480,000 equal $6 per machine hour 80,000. Company Wide Rate: Direct Material Costs x Batch Size plus Direct Labor Costs x Batch Size Maxiflow: Alaska: 135 x 20 equal 2700 110 x 20 equal 2200 75 x 20 equal 1500 95 x 20 equal 1900 equal $4200 per batch equal $4100 per batch Departmental Rate. Direct Materials Costs plus Direct Labor Costs divided by Each Department Hour Maxiflow: 135 plus 75 equal $210 Radiator Parts Fabrication: 210 divided by 28 equal $7.50 per batch Radiator Assembly, Weld, and Test equal 210 divided by 30 equal $7 per batch Compressor Parts Fabrication: 210 divided by 32 equal $6.60 per batch Compressor Assembly and Test: 210 divided by 26 equal $8.10 per batch Alaska: 110 plus 95 equal 205 Radiator Parts Fabrication: 205 divided by 16 equal $12.80 per batch Radiator Assembly, Weld, and Test: 205 divided by 74 equal $2.70 per batch Compressor Parts Fabrication: 205 divided by 8 equal $25.60 per batch Compressor Assembly and Test: 205 divided by 66 equal $3.10 per batch. There was only a $100 difference between Maxiflow and Alaska when it came to company-wide rates per batch.
3. Briefly describe how the current production cost assignment system works. What are the consumption ratios (activity percentages) for assigning manufacturing overhead to each product at present?
Direct materials Raw materials inventory ................. $ 0 (Dec. 1) Raw materials purchased ............... 70,000 Less: Raw materials inventory (Dec. 31) .................................... 0 Direct materials used............................... Direct labor .................................................
According to this method, every unit of the product is assigned all direct, fixed, and variable costs. This method includes the cost of direct materials and labor as well as a portion of the overhead costs associated with it in the final costing of every unit of the product.
Overhead costs include rent, office staff, depreciation, and other. Once the flexible budget was complete, variances between the actual and flexible budget could be calculated (Exhibit B). The variance for frame assembly was favorable with actual costs being $82,663 less than in the flexible budget. The variances for wheel and final assembly however were both unfavorable. Wheel assembly had an unfavorable variance of $50,650, while final assembly variance was the highest at an unfavorable variance of $231,200. Taking into account these three aspects of direct cost, direct cost has an unfavorable variance $199,187. Although most overhead costs are fixed, 2/3 of other costs are variable and increase with the increased production. As shown in Exhibit B, overhead variance is unfavorable at $60,000. The direct cost variance and overhead variable together lead to a total unfavorable variance of $259,187.
• This cost method does not provide the best system for JDCW’s cost allocation. By using only three overhead rates the present system grossly undermines the true production costs since other activities of the production process are not acknowledged.
1. Use the Overhead Cost Activity Analysis in Exhibit 5 and other data on manufacturing
Therefore, there is no doubt that it is significant to allocate overhead cost accurately for every production. If the overhead is calculated incorrectly, the selling price of the product will change. The company will not cover the cost and make a loss.
1. Define and explain the meaning of a predetermined manufacturing overhead rate that is applied in a job-order costing system.
The current method of apportioning production overheads based on direct labour hours can be described as a traditional approach to product costing. In a manufacturing company’s financial statements, each item produced must be allocated some of the production overheads to make the statements compliant. Sometimes the individual costs of these items can be calculated incorrectly based on overall production overhead and the system of allocating in place, however the overall financial statement can still be accurate. This traditional method of allocating the production