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12. On January 31, the managers of Integra, Inc. seek to determine the cost of producing their product during January for product pricing and control purposes. The company can easily determine the costs of direct materials and direct labor used in January production, but many fixed indirect costs are not affected by the level of production activity and have not yet been incurred. The managers can reasonably estimate the
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- If a factory operates at 100% of capacity one month, 90% of capacity the next month, and 105% of capacity the next month, will a different cost per unit be charged to the work-in-process account each month for factory overhead assuming that a predetermined annual overhead rate is used?arrow_forwardCommunications Jamarcus Bradshaw, plant manager of Georgia Paper Companys papermaking mill, was looking over the cost of production reports for July and August for the Papermaking Department. The reports revealed the following: Jamarcus was concerned about the increased cost per ton from the output of the department. As a result, he asked the plant controller to perform a study to help explain these results. The controller, Leann Brunswick, began the analysis by performing some interviews of key plant personnel in order to understand what the problem might be. Excerpts from an interview with Len Tyson, a paper machine operator, follow: Len: We have two papermaking machines in the department. I have no data, but I think paper machine No. 1 is applying too much pulp and, thus, is wasting both conversion and materials resources. We haven't had repairs on paper machine No. 1 in a while. Maybe this is the problem. Leann: How does too much pulp result in wasted resources? Len: Well, you see, if too much pulp is applied, then we will waste pulp material. The customer will not pay for the extra product; we just use more material to make the product. Also, when there is too much pulp, the machine must be slowed down in order to complete the drying process. This results in additional conversion costs. Leann: Do you have any other suspicions? Len: Well, as you know, we have two productsgreen paper and yellow paper. They are identical except for the color. The color is added to the papermaking process in the paper machine. I think that during August these two color papers have been behaving very differently. I don't have any data, but it just seems as though the amount of waste associated with the green paper has increased. Leann: Why is this? Len: I understand that there has been a change in specifications for the green paper, starting near the beginning of August. This change could be causing the machines to run poorly when making green paper. If this is the case, the cost per ton would increase for green paper. Leann also asked for a database printout providing greater detail on Augusts operating results. September 9 Requested by: Leann Brunswick Papermaking DepartmentAugust detail Prior to preparing a report, Leann resigned from Georgia Paper Company to start her own business. You have been asked to take the data that Leann collected, and write a memo to Jamarcus Bradshaw with a recommendation to management. Your memo should include analysis of the August data to determine whether the paper machine or the paper color explains the increase in the unit cost from July. Include any supporting schedules that are appropriate. Round any calculations to the nearest cent.arrow_forwardUsing the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.arrow_forward
- Potter Company has installed a JIT purchasing and manufacturing system and is using back-flush accounting for its cost flows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion of goods as the second trigger point. During the month of June, Potter had the following transactions: 40,500 labor plus 222,750 overhead. There were no beginning or ending inventories. All goods produced were sold with a 60 percent markup. Any variance is closed to Cost of Goods Sold. (Variances are recognized monthly.) Required: Prepare the journal entries for the month of June using backflush costing, assuming that Potter uses the sale of goods as the second trigger point instead of the completion of goods.arrow_forwardRipley, Inc., costs products using a normal costing system. The following data are available for last year: Overhead is applied on the basis of direct labor hours. Required: 1. What was the predetermined overhead rate? 2. What was the applied overhead for last year? 3. Was overhead over- or underapplied, and by how much? 4. What was the total cost per unit produced (carry your answer to four significant digits)?arrow_forwardThe 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?arrow_forward
- The vice president for Sales of Huber Corporation has received the income statement for November. The statement has been prepared on the variable costing basis and is reproduced below. The firm has just adopted a variable costing system for internal reporting purposes. The controller attached the following notes to the statements: The unit sales price for November averaged $24. The standard unit manufacturing costs for the month were Variable cost $12 Fixed OH cost 4 Total cost $16 The unit rate for fixed manufacturing costs is a predetermined rate based upon a normal monthly production of 150,000 units. Production for November was 45,000 units in excess of sales. The inventory at November 30 consisted of 80,000 units. Huber Corporation Income Statement For the Month of November ($000 omitted) Sales $ 2,400 Minus: Variable standard COGS (1,200) Manufacturing margin $ 1,200 Minus: Fixed manufacturing costs at budget $600 Fixed manufacturing cost budget variance 0 (600) Gross margin $…arrow_forwardPyramid Company expects to incur $3,000,000 in manufacturing overhead costs this year. During the year, it expects to use 40,000 direct labor hours at a cost of $600,000 and 80,000 machine hours. Required: a. Prepare a predetermined overhead rate based on direct labor hours, direct labor cost, and machine hours. b. Why might Pyramid Company prefer to use machine hours to allocate manufacturing overhead? c. Using each of the predetermined overhead rates calculated in part a and the data that follows for job 128, determine the cost of job 128arrow_forward5.The following information was gathered for Big Dawg Corp. for the year ending 2021. Budgeted direct labor hours 15,500 Actual direct labor hours 16,200 Budgeted factory overhead $73,625 Actual factory overhead $74,990 Gross profit $95,000 Assume direct labor hours is the cost driver Required: What is the amount of over/under applied overhead ? What is the adjusted gross profit ?arrow_forward
- The controller of ABC Company that produces face masks has requested a quick estimate of the manufacturing supplies needed for its plant for the month of April. When production is expected to be at 470,000 units. Their high-low method used in estimating manufacturing supplies determined that fixed costs part of expenses is P70,560 and the variable cost per unit is P1.45 per unit. How much is the estimated manufacturing supplies for April? P 652,500 P 681,500 P 749,180 P 752,060 Group of answer choices 1 2 3 4arrow_forwardAs an assistant cost accountant for Mississippi Industries, you have been assigned to review the activity base for the predetermined factory overhead rate. The president, Tony Favre, has expressed concern that the over- or underapplied overhead has fluctuated excessively over the years.An analysis of the company’s operations and use of the current overhead rate (direct labor cost) has narrowed the possible alternative overhead bases to direct labor cost and machine hours. For the past five years, the following data have been gathered: Attachment In teams:1. Calculate a predetermined factory overhead rate for each alternative base, assuming that rates would have been determined by relating the total amount of factory overhead for the past five years to the base.2. For each of the past five years, determine the over- or underapplied overhead based on the two predetermined overhead rates developed in part (1).3. Which predetermined overhead rate would you recommend? Discuss the basis for…arrow_forwardLongobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 46,000 labor-hours. The estimated variable manufacturing overhead was S6.25 per labor-hour and the estimated total fixed manufacturing overhead was S1,026,260. The actual labor-hours for the year turned out to be 41,200 labor- hours. The predetermined overhead rate for the recently completed year was closest to: A) 28 56 per labor-hour B) 22.31 per labor-hour C) 6.25 per labor-hour D) 31.16 per labor-hourarrow_forward
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