An engineering company which uses job costing to attribute costs to individual products and services provided to its customers has began the preparation of its fixed production overhead cost budget for 2017. Cost has been identified as follows:- Machining Assembly Finishing Stores Maintenance К000 K'000 К000 K'000 KO00 Apportioned cost 6,000 2,500 1,500 1,000 800 The stores and maintenance departments are production department and provide services as- follows: Machining Assembly Finishing Stores Maintenance Stores 40% 30% 20% 10% Maintenance 55% 20% 20% 5% The number of machine and labour hours budgeted for 2018 is: Machining Assembly Finishing Machine hours 50,000 4,000 5,000 Labour hours 10,000 30,000 20,000 Required: A) Calculate appropriate overhead absorption rates for each production department for 2017. B) Prepare a quotation for job K34 to be commenced early in 2017 assuming it has: Direct materials costing К24, 000 Direct labour costing К15, 000 And requires: Machine hours labour hours Machining department 45 10 Assembly 15 Finishing department 4 12 And that profit is 20% of selling price.

An engineering company which uses job costing to attribute costs to individual products and services provided to its customers has began the preparation of its fixed production overhead cost budget for 2017. Cost has been identified as follows:- Machining Assembly Finishing Stores Maintenance К000 K'000 К000 K'000 KO00 Apportioned cost 6,000 2,500 1,500 1,000 800 The stores and maintenance departments are production department and provide services as- follows: Machining Assembly Finishing Stores Maintenance Stores 40% 30% 20% 10% Maintenance 55% 20% 20% 5% The number of machine and labour hours budgeted for 2018 is: Machining Assembly Finishing Machine hours 50,000 4,000 5,000 Labour hours 10,000 30,000 20,000 Required: A) Calculate appropriate overhead absorption rates for each production department for 2017. B) Prepare a quotation for job K34 to be commenced early in 2017 assuming it has: Direct materials costing К24, 000 Direct labour costing К15, 000 And requires: Machine hours labour hours Machining department 45 10 Assembly 15 Finishing department 4 12 And that profit is 20% of selling price.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 8P: Journalizing the distribution of service department costs to production departments Required: Using...

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For E2-17, prepare any journal entries that would have been different if the only trigger points had been the purchase of materials and the sale of finished goods. Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
Cynthia Rogers, the cost accountant for Sanford Manufacturing, is preparing a management report that must include an allocation of overhead. The budgeted overhead for each department and the data for one job are as follows: Using the departmental overhead application rates, and allocating overhead on the basis of direct labor hours, overhead applied to Job 231 in the Tooling Department would be: a. 44.00. b. 197.50. c. 241.50. d. 501.00.
Geneva, Inc., makes two products, X and Y, that require allocation of indirect manufacturing costs. The following data were compiled by the accountants before making any allocations: The total cost of purchasing and receiving parts used in manufacturing is 60,000. The company uses a job-costing system with a single indirect cost rate. Under this system, allocated costs were 48,000 and 12,000 for X and Y, respectively. If an activity-based system is used, what would be the allocated costs for each product?
Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 80,000. b. Requisitioned raw materials to production, 80,000. c. Distributed direct labor costs, 10,000. d. Factory overhead costs incurred, 60,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 225,000, on account.
Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
San Mateo Optics, Inc., specializes in manufacturing lenses for large telescopes and cameras used in space exploration. As the specifications for the lenses are determined by the customer and vary considerably, the company uses a job-order costing system. Manufacturing overhead is applied to jobs on the basis of direct labor hours, utilizing the absorption- or full-costing method. San Mateos predetermined overhead rates for 20x1 and 20x2 were based on the following estimates. Jim Cimino, San Mateos controller, would like to use variable (direct) costing for internal reporting purposes as he believes statements prepared using variable costing are more appropriate for making product decisions. In order to explain the benefits of variable costing to the other members of San Mateos management team, Cimino plans to convert the companys income statement from absorption costing to variable costing. He has gathered the following information for this purpose, along with a copy of San Mateos 20x1 and 20x2 comparative income statement. San Mateo Optics, Inc. Comparative Income Statement For the Years 20x1 and 20x2 San Mateos actual manufacturing data for the two years are as follows: The companys actual inventory balances were as follows: For both years, all administrative expenses were fixed, while a portion of the selling expenses resulting from an 8 percent commission on net sales was variable. San Mateo reports any over-or underapplied overhead as an adjustment to the cost of goods sold. Required: 1. For the year ended December 31, 20x2, prepare the revised income statement for San Mateo Optics, Inc., utilizing the variable-costing method. Be sure to include the contribution margin on the revised income statement. 2. Describe two advantages of using variable costing rather than absorption costing. (CMA adapted)
A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Minor Co. has a job order cost system and applies overhead based on departmental rates. Service Department 1 has total budgeted costs of 168,000 for next year. Service Department 2 has total budgeted costs of 280,000 for next year. Minor allocates service department costs solely to the producing departments. Service Department 1 cost is allocated to producing departments on the basis of machine hours. Service Department 2 cost is allocated to producing departments on the basis of direct labor hours. Producing Department 1 has budgeted 8,000 machine hours and 12,000 direct labor hours. Producing Department 2 has budgeted 2,000 machine hours and 12,000 direct labor hours. What is the total cost allocation from the two service departments to Producing Department 1? a. 173,600 b. 140,000 c. 134,400 d. 274,400
A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Compute the total job cost for each of the following scenarios: a. If the direct labor cost method is used in applying factory overhead and the predetermined rate is 100%, what amount should be charged to Job 2010 for factory overhead? Assume that direct materials used totaled 5,000 and that the direct labor cost totaled 3,200. b. If the direct labor hour method is used in applying factory overhead and the predetermined rate is 10 an hour, what amount should be charged to Job 2010 for factory overhead? Assume that the direct materials used totaled 5,000, the direct labor cost totaled 3,200, and the number of direct labor hours totaled 250. c. If the machine hour method is used in applying factory overhead and the predetermined rate is 12.50 an hour, what amount should be charged to Job 2010 for factory overhead? Assume that the direct materials used totaled 5,000, the direct labor cost totaled 3,200, the direct labor hours were 250 hours, and the machine hours were 295 hours.
Primera Company produces two products and uses a predetermined overhead rate to apply overhead. Primera currently applies overhead using a plantwide rate based on direct labor hours. Consideration is being given to the use of departmental overhead rates where overhead would be applied on the basis of direct labor hours in Department 1 and on the basis of machine hours in Department 2. At the beginning of the year, the following estimates are provided: Actual results reported by department and product during the year are as follows: Required: 1. Compute the plantwide predetermined overhead rate and calculate the overhead assigned to each product. 2. Calculate the predetermined departmental overhead rates and calculate the overhead assigned to each product. 3. Using departmental rates, compute the applied overhead for the year. What is the under- or overapplied overhead for the firm? 4. Prepare the journal entry that disposes of the overhead variance calculated in Requirement 3, assuming it is not material in amount. What additional information would you need if the variance is material to make the appropriate journal entry?
Lansing. Inc., provided the following data for its two producing departments: Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 units of Form A produced and sold and 50,000 of Form B. Required: 1. Calculate the overhead rates for each department. 2. Using departmental rates, assign overhead to live two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using direct labor hours? 3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates, and compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?