I need the answer to 2.B-3. 2. Using a departmental approach:a. Calculate the departmental overhead rates.b. Calculate the total amount of overhead that would be assigned to each product.c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate sellingand administrative expenses based on sales dollars).3. Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmentalapproaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activitycost pools as follows:ManufacturingActivity MeasurehoursActivity Cost PoolMachiningAssemble and packOrder processingOverhead$ 417,500282,500230,000340, ө0ө80,000MoldingDirect labor-hours in Assemble and PackNumber of customer ordersSetupsOther (unused capacity)Setup hours$1,350,000She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. Themolding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and threehours are required to setup for an order of the Advanced model.The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertisingcosts include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling andadministrative costs are organization-sustaining in nature.Using the additional information provided by the production manager, calculate:a. An activity rate for each activity cost pool.b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach.c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The companyconsiders all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based ondirect labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (heallocated selling and administrative expenses to products based on sales dollars):BasicAdvancedTotalNumber of units produced and sold20,00010,00030,000$3,000,0002,300,000700,000$2,000,0001,350,000650,000480,000$ 5,000,0003,650,0001,350,0001,200,000SalesCost of goods soldGross marginSelling and administrative expenses720,000Net operating income (loss)$ (20,000)170,000150,000Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model.Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company'sMolding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department wouldbe allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information:Assembleand PackMolding$ 787,500TotalManufacturing overhead costsDirect labor hours:$ 562,500$ 1,350,000Basic10,0005,00020,00010,00030,00015,000AdvancedMachine hours:12,00010,00012,00010,000BasicAdvanced

Overhead costs are expenses incurred by a company that are not directly related to the creation or…

Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic Advanced Total Number of units produced and sold 20,000 10,000 30,000 Sales $3,000,000 $2,000,000 $ 5,000,000 Cost of goods sold Gross margin Selling and administrative expenses 2,300,000 1,350,000 700,000 720,000 650,000 480,000 3,650,000 1,350,000 1,200,000 Net operating income (loss) $ (20,000) $ 170,000 $ 150, е00

Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic Advanced Total Number of units produced and sold 20,000 10,000 30,000 Sales $3,000,000 $2,000,000 $ 5,000,000 Cost of goods sold Gross margin Selling and administrative expenses 2,300,000 1,350,000 700,000 720,000 650,000 480,000 3,650,000 1,350,000 1,200,000 Net operating income (loss) $ (20,000) $ 170,000 $ 150, е00

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...

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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.
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?
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.)
Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: aCalculated using number of dies as the single unit-level driver. bCalculated by multiplying the consumption ratio of each product by the cost of each activity. Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activities are assigned in proportion to the cost of the five activities. 2. Calculate the error relative to the fully specified ABC product cost and comment on the outcome. 3. What if activities 1, 2, 5, and 8 each had a cost of 650,000 and the remaining activities had a cost of 50,000? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach. Comment on the implications for the approximately relevant approach.
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?
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?
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.
Cassien Inc. manufactures products that pass through two or more processes. During June, equivalent units were computed using the weighted average method: Required: 1. Calculate the unit cost for June using the weighted average method. 2. Using the weighted average method, determine the cost of EWIP and the cost of the goods transferred out. 3. CONCEPTUAL CONNECTION Cassien had just finished implementing a series of measures designed to reduce the unit cost to 2.00 and was assured that this had been achieved and should be realized for Junes production. Yet, upon seeing the unit cost for June, the president of the company was disappointed. Can you explain why the full effect of the cost reductions may not show up in June? What can you suggest to overcome this problem?
The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?
Medical Tape makes two products: Generic and Label. It estimates it will produce 423,694 units of Generic and 652,200 of Label, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: How much is the overhead allocated to each unit of Generic and Label?
Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activities for the year ending 20x1 (actual price per unit of the activity driver is assumed to be equal to the standard price): Required: 1. Prepare a cost report for the year ending 20x1 that shows value-added costs, non-value-added costs, and total costs for each activity. 2. Explain why expediting products and storing goods are non-value-added activities. 3. What if receiving cost is a step-fixed cost with each step being 1,500 orders whereas assembly cost is a variable cost? What is the implication for reducing the cost of waste for each activity?
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.)