The manager at Screaming Trees has been trying to calculate the portion of the company's overhead expenses that is fixed and the portion that is variable. Over the past twelve months, the number of yards of mulch processed was highest in July, when the total monthly overhead costs totaled $32,000 for 37,000 yards of mulch processed. The lowest number of yards of mulch processed in the last twelve months occurred in October, when total overhead costs were $26,000 for 26,000 yards of mulch processed. What was the variable cost per yard? OA. $1.00 O B. $1.83 O C. $0.55 O D. $0.86

The manager at Screaming Trees has been trying to calculate the portion of the company's overhead expenses that is fixed and the portion that is variable. Over the past twelve months, the number of yards of mulch processed was highest in July, when the total monthly overhead costs totaled $32,000 for 37,000 yards of mulch processed. The lowest number of yards of mulch processed in the last twelve months occurred in October, when total overhead costs were $26,000 for 26,000 yards of mulch processed. What was the variable cost per yard? OA. $1.00 O B. $1.83 O C. $0.55 O D. $0.86

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 14P: Abbey Products Company is studying the results of applying factory overhead to production. The...

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Pocono Cement Forms expects $900,000 in overhead during the next year. It does not know whether it should apply overhead on the basis of its anticipated direct labor hours of 60,000 or its expected machine hours of 30,000. Determine the product cost under each predetermined allocation rate if the last job incurred $1,550 in direct material cost, 90 direct labor hours, and 75 machine hours. Wages are paid at $16 per hour.
During the month, a company with no departmentalization incurred costs of 45,000 for materials, 36,000 for labor, and 22,500 for factory overhead. There were no units in process at the beginning or at the end of the month, and 20,000 units were completed. Determine the unit cost for the month for materials, labor, factory overhead, and the total unit cost. (Round unit costs to three decimal places.)
Abbey Products Company is studying the results of applying factory overhead to production. The following data have been used: estimated factory overhead, 60,000; estimated materials costs, 50,000; estimated direct labor costs, 60,000; estimated direct labor hours, 10,000; estimated machine hours, 20,000; work in process at the beginning of the month, none. The actual factory overhead incurred for November was 80,000, and the production statistics on November 30 are as follows: Required: 1. Compute the predetermined rate, based on the following: a. Direct labor cost b. Direct labor hours c. Machine hours 2. Using each of the methods, compute the estimated total cost of each job at the end of the month. 3. Determine the under-or overapplied factory overhead, in total, at the end of the month under each of the methods. 4. Which method would you recommend? Why?
Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 20X1: During 20X1, Marston worked a total of 80,000 direct labor hours, used 250,000 machine hours, made 32,000 moves, and performed 120 batch inspections. The following actual costs were incurred: Marston applies overhead using rates based on direct labor hours, machine hours, number of moves, and number of batches. The second level of activity (the right column in the preceding table) is the practical level of activity (the available activity for resources acquired in advance of usage) and is used to compute predetermined overhead pool rates. Required: 1. Prepare a performance report for Marstons manufacturing costs in the current year. 2. Assume that one of the products produced by Marston is budgeted to use 10,000 direct labor hours, 15,000 machine hours, and 500 moves and will be produced in five batches. A total of 10,000 units will be produced during the year. Calculate the budgeted unit manufacturing cost. 3. One of Marstons managers said the following: Budgeting at the activity level makes a lot of sense. It really helps us manage costs better. But the previous budget really needs to provide more detailed information. For example, I know that the moving materials activity involves the use of forklifts and operators, and this information is lost when only the total cost of the activity for various levels of output is reported. We have four forklifts, each capable of providing 10,000 moves per year. We lease these forklifts for five years, at 10,000 per year. Furthermore, for our two shifts, we need up to eight operators if we run all four forklifts. Each operator is paid a salary of 30,000 per year. Also, I know that fuel costs about 0.25 per move. Assuming that these are the only three items, expand the detail of the flexible budget for moving materials to reveal the cost of these three resource items for 20,000 moves and 40,000 moves, respectively. Based on these comments, explain how this additional information can help Marston better manage its costs. (Especially consider how activity-based budgeting may provide useful information for non-value-added activities.)
Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500 machine hours. The cost to make Job 416 is $95 in neon, 15 hours of labor at $13 per hour, and five machine hours. During the month, it incurs $95 in indirect material cost, $130 in administrative labor, $320 in utilities, and $350 in depreciation expense. What is the predetermined overhead rate if machine hours are considered the cost driver? What is the cost of Job 416? What is the overhead incurred during the month?
Argo Manufacturing Co. had 500 units, three-fifths completed, in process at the beginning of the month. During the month, 2,000 units were started in process and finished. There was no work in process at the end of the month. Unit cost of production for the month was 1.20. Costs for materials, labor, and factory overhead incurred in the current month totaled 2,655. Calculate the unit cost for the prior month. (Hint: You must first determine what the dollar balance in work in process must have been at the beginning of the month, as well as the equivalent production of the units in beginning inventory.)
The cost accountant for River Rock Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning February 1 would be 3,150,000, and total direct labor costs would be 1,800,000. During February, the actual direct labor cost totalled 160,000, and factory overhead cost incurred totaled 283,900. a. What is the predetermined factory overhead rate based on direct labor cost? b. Journalize the entry to apply factory overhead to production for February. c. What is the February 28 balance of the account Factory OverheadBlending Department? d. Does the balance in part (c) represent over- or underapplied factory overhead?
Rockford Company has four departmental accounts: Building Maintenance, General Factory Overhead, Machining, and Assembly. The direct labor hour method is used to apply factory overhead to the jobs being worked on in Machining and Assembly. The company expects each production department to use 30,000 direct labor hours during the year. The estimated overhead rates for the year include the following: During the year, both Machining and Assembly used 28,000 direct labor hours. Factory overhead costs incurred during the year follow: In determining application rates at the beginning of the year, cost allocations were made as follows, using the sequential distribution method: Building Maintenance to: General Factory Overhead, 10%; Machining, 50%; Assembly, 40%. General factory overhead was distributed according to direct labor hours. Required: Determine the under- or overapplied overhead for each production department. (Hint: First you must distribute the service department costs.)
Patterson Corporation expects to incur 70,000 of factory overhead and 60,000 of general and administrative costs next year. Direct labor costs at 5 per hour are expected to total 50,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 20 hours of direct labor? a. 120 b. 260 c. 28 d. 140
Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in the coming year. In the coming year, Johnston expects to powder coat 120,000 units. Each unit takes 1.3 direct labor hours. Johnston has found that supplies and gas (used to run the drying ovensall units pass through the drying ovens after powder coat paint is applied) tend to vary with the number of units produced. All other overhead categories are considered to be fixed. (Round all overhead rates to the nearest cent.) Required: 1. Calculate the number of direct labor hours Johnston must budget for the coming year. Calculate the variable overhead rate. Calculate the total fixed overhead for the coming year. 2. Prepare an overhead budget for Johnston for the coming year. Show the total variable overhead, total fixed overhead, and total overhead. Calculate the fixed overhead rate and the total overhead rate (rounded to the nearest cent). 3. What if Johnston had expected to make 118,000 units next year? Assume that the variable overhead per unit does not change and the total fixed overhead amounts do not change. Calculate the new budgeted direct labor hours and prepare a new overhead budget. Calculate the fixed overhead rate and the total overhead rate (rounded to the nearest cent).
Calen Company manufactures and sells three products in a factory of three departments. Both labor and machine time are applied to the products as they pass through each department. The nature of the machine processing and of the labor skills required in each department is such that neither machines nor labor can be switched from one department to another. Calens management is attempting to plan its production schedule for the next several months. The planning is complicated by the fact that labor shortages exist in the community and some machines will be down several months for repairs. Following is information regarding available machine and labor time by department and the machine hours and direct labor hours required per unit of product. These data should be valid for at least the next six months. Calen believes that the monthly demand for the next six months will be as follows: Inventory levels will not be increased or decreased during the next six months. The unit cost and price data for each product are as follows: Required: 1. Calculate the monthly requirement for machine hours and direct labor hours for producing Products 401, 402, and 403 to determine whether or not the factory can meet the monthly sales demand. 2. Determine the quantities of 401, 402, and 403 that should be produced monthly to maximize profits. Prepare a schedule that shows the contribution to profits of your product mix. 3. Assume that the machine hours available in Department 3 are 1,500 instead of 2,700. Calculate the optimal monthly product mix using the graphing approach to linear programming. Prepare a schedule that shows the contribution to profits from this optimal mix. (CMA adapted)
When setting its predetermined overhead application race, Tasty Box Meals estimated its overhead would be $100,000 and would require 25,000 machine hours in the next year. At the end of the year. It found that actual overhead was $102,000 and required 26,000 machine hours. Determine the predetermined overhead rate. What is the overhead applied during the year? Prepare the journal entry to eliminate the under applied or over applied overhead.