The following estimates relate to the Miranda Processing Company for the year ended December 31, 2012. Departments Processing Servicing W X Y A B Indirect Costs $176,000 $156,500 $141,000 $101,000 $90,000 Dept. B's Costs 35% 40% 15% 10% - 0% Dept. A's Costs 50% 20% 30% 0% 0% Hours Worked 3,000 3,300 3,750 Overheads are applied to production on the basis of the number of hours worked in each process. During March 2013 an order was received which involved the following Process W X Input material: 7,000 kg $71,000 - Material added $7,300 $8,070 Labour cost $26,700 $20,160 Normal losses 5% 4% Output 6,450 kg 6,242 kg Process hours worked 500 300 Scrap value of losses $7.00/kg $15.00/kg i) Calculate an overhead absorption rate for each process. ii) Use process accounts to calculate the cost of the order processed during March. iii)Prepare the abnormal gain account. iv) Given that the actual overheads incurred in processing department W turn out to be $350,000 and the actual processing hours worked 3,500, whilst the actual overheads incurred for processing department X turn out to be $165,000 and actual processing hours 3,000, calculate the under- or over- recovery of overheads for each department.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter4: Job Order Costing

Section: Chapter Questions

Problem 2PA: York Company Is a machine shop that estimated overhead will be $50,000, consisting of 5,000 hours of...

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The following estimates relate to the Miranda Processing Company for the year ended
December 31, 2012.

Departments
Processing Servicing
	W	X	Y	A	B
Indirect Costs	$176,000	$156,500	$141,000	$101,000	$90,000
Dept. B's Costs	35%	40%	15%	10% -	0%
Dept. A's Costs	50%	20%	30%	0%	0%
Hours Worked	3,000	3,300	3,750

Overheads are applied to production on the basis of the number of hours worked in each
process.
During March 2013 an order was received which involved the following

Process
	W	X
Input material: 7,000 kg	$71,000 -
Material added	$7,300	$8,070
Labour cost	$26,700	$20,160
Normal losses	5%	4%
Output	6,450 kg	6,242 kg
Process hours worked	500	300
Scrap value of losses	$7.00/kg	$15.00/kg

i) Calculate an overhead absorption rate for each process.
ii) Use process accounts to calculate the cost of the order processed during March.
iii)Prepare the abnormal gain account.
iv) Given that the actual overheads incurred in processing department W turn out to be
$350,000 and the actual processing hours worked 3,500, whilst the actual overheads
incurred for processing department X turn out to be $165,000 and actual processing hours
3,000, calculate the under- or over- recovery of overheads for each department.

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