Managerial Accounting
Managerial Accounting
16th Edition
ISBN: 9781259995484
Author: Ray Garrison
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 2, Problem 20P
To determine

Pre- determined over head rate: Pre- determined over head rate is the indirect cost obtained in a specific period of time by dividing the manufacturing cost and the cost drivers.

Determine the various figures as mentioned in the question for McCullough

Expert Solution & Answer
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Answer to Problem 20P

Solution: The solution obtained is as under-

    Particulars Amount
    Answer 1 (a) $979.00
    Answer 1 (b)
    Patient A $43,206.00
    Patient B $62,759.00
    Answer 2 (a)
    ICU $1,926.00
    Others $873.78
    Answer 2 (b)
    Patient A $41,732.89
    Patient B $67,914.89

Insights revealed by the staff accountant’s approach are explained as under.

Explanation of Solution

The calculations are obtained as under following the steps given in the brackets-

    Particulars ICU Other
    1 Estimated number of patient days 2000 18000
    2 Variable overhead cost per patient day $326.00 $96.00
    3 Estimated variable overhead cost ( 1 x 2 ) $6,52,000.00 $17,28,000.00
    4 Estimated fixed overhead cost $32,00,000.00 $1,40,00,000.00
    5 Total estimated overhead cost ( 3 + 4 ) $38,52,000.00 $1,57,28,000.00
    6 Total estimated overhead cost ( ICU + Other ) $ 1,95,80,000.00
    7 Total estimated number of patient days 20000
    8 The pre-determined overhead rate (6 divided by 7) $979.00
    9 The pre-determined overhead rate as suggested by staff accountant (5 divided by 1) $1,926.00 $873.78
    Particulars Patient A Patient B
    1 Direct Materials $4,500.00 $6,200.00
    2 Direct Labor cost $25,000.00 $36,000.00
    3 Number of patient days - ICU 0 7
    4 Number of patient days - Others 14 14
    5 The pre-determined overhead rate $979.00 $979.00
    6 Overhead cost
    (A) ( 4 x 5 ) $13,706.00 $ -
    (B) [(3+4)x 5]

    $ - $20,559.00
    7 Total cost( 1 + 2 + 6A ) $43,206.00 $ -
    8 Total cost( 1 + 2 + 6B ) $ - $62,759.00
    Particulars ICU Others
    9 The pre-determined overhead rate as suggested by staff accountant $1,926.00 $873.78
    10 Patient A
    (A) Number of patient days 0 14
    (B) Overhead cost ( 9 x 10A ) $ - $12,232.89
    (C) Direct Materials $4,500.00
    (D) Direct Labor cost $25,000.00
    (E) Total Cost ( B + C + D ) $41,732.89
    11 Patient B
    (A) Number of patient days 7 14
    (B) Overhead cost ( 9 x 10A ) $13,482.00 $12,232.89
    (C) Direct Materials $6,200.00
    (D) Direct Labor cost $36,000.00
    (E) Total Cost ( B + C + D ) $67,914.89
Conclusion

Thus, the figures are obtained by the above mentioned calculations.

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Chapter 2 Solutions

Managerial Accounting

Ch. 2 - Prob. 1QCh. 2 - What is absorption costing?Ch. 2 - What is normal costing?Ch. 2 - How is the unit product cost of a job calculated? Ch. 2 - Explain the four-step process used to compute a...Ch. 2 - What is the purpose of the job cost sheet in a...Ch. 2 - Explain why some production costs must be assigned...Ch. 2 - Why do companies use predetermined overhead rates...Ch. 2 - What factors should be considered in selecting an...Ch. 2 - If a company fully allocates all of its overhead...Ch. 2 - Would you expect the amount of applied overhead...Ch. 2 - Prob. 12QCh. 2 - What is a plantwide overhead rate? Whyare multiple...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 3AECh. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 1F15Ch. 2 - Prob. 2F15Ch. 2 - Prob. 3F15Ch. 2 - Prob. 4F15Ch. 2 - Prob. 5F15Ch. 2 - Prob. 6F15Ch. 2 - Prob. 7F15Ch. 2 - Prob. 8F15Ch. 2 - Prob. 9F15Ch. 2 - Prob. 10F15Ch. 2 - Prob. 11F15Ch. 2 - Sweeten Company had no jobs in progress at the...Ch. 2 - Prob. 13F15Ch. 2 - Prob. 14F15Ch. 2 - Prob. 15F15Ch. 2 - EXERCISE 2-1 Compute a Predetermined Overhead Rate...Ch. 2 - Prob. 2ECh. 2 - EXERCISE 2–3 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 24 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 2-5 Computing Total Job Costs and Unit...Ch. 2 - Prob. 6ECh. 2 - EXERCISE 2-7 Job-Order Costing; Working Backwards...Ch. 2 - EXERCISE 2-8 Applying Overhead Cost; Computing...Ch. 2 - EXERCISE 2–9 Job-Order Costing and Decision Making...Ch. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - EXERCISE 2—13 Departmental Predetermined Overhead...Ch. 2 - EXERCISE 214 Job-Orders Costing for a Service...Ch. 2 - Prob. 15ECh. 2 - PROBLEM 2—16 Plantwide Predetermined Overhead...Ch. 2 - PROBLEM 217 Plantwide and Departmental...Ch. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - PROBLEM 2-21 Plant wide Versus Multiple...Ch. 2 - CASE 2-22 Plantwide versus Departmental Overhead...
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