Managerial Accounting
16th Edition
ISBN: 9781259995484
Author: Ray Garrison
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 2.B, Problem 2E
EXERCISE 2B-2
Security Pension Services helps clients to set up and administer pension plans that are in compliance with tax laws and regulatory requirements. The firm uses a
"Professional staff hours available" is a measure of the capacity of the firm. Any hours available that are not charged to clients7 accounts represent unused capacity. All of the firm’s overhead is fixed.
Required:
- Marta Brinksi is an established client whose pension plan was set up many years ago. In both this year and last year, only 2.5 hours of professional staff time were charged to Ms. Brinksi7 s account. If the company bases its predetermined overhead rate on the estimated overhead cost and the estimated professional staff hours to be charged to clients, how much overhead cost would have been applied to Ms. Brinksi’s account last year? This year?
- Suppose that the company bases its predetermined overhead rate on the estimated overhead cost and the estimated professional staff hours to be charged to clients as in (l) above. Also suppose that the actual professional staff hours charged to clients accounts and the actual overhead costs turn out to be exactly as estimated in both years. How much unused capacity cost would the company report last year? How about for this year?
- Refer back to the data concerning Ms. Brinksi in (l) above. If file company bases its predetermined overhead rate on the professional staff hours available, how much overhead cost would have been applied to Ms. Brinksi s account last year? This year?
- Suppose that the company bases its predetermined overhead rate on the professional staff hours available as in (3) above. Also suppose that the actual professional staff hours charged to clients accounts and the actual overhead costs turn out to be exactly as estimated in both years. How much unused capacity cost would the company report last year9 How about for this year9
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a. REQUIREMENTS #2 and #3 ONLY of Exercise 4-49 (picture 2). Assume Direct Labor workers make $20 per hour, so with the given labor cost per job, you can determine the number of hours worked. CHANGE the Exercise to say that Overhead is applied at the rate of $32 per direct labor hour. ALSO CHANGE to say that Job #39 and Job #40 were completed and sold, while Job #41 and Job #42 are complete but not sold, and Job #43 is not completed yet.
b. Use the information in Problem 4-53 (picture 2) to prepare journal entries for the month of July with the following CHANGES. First, assume that the company uses a plantwide overhead rate based on direct labor dollars. Also assume that estimated information for the year includes Direct labor dollars of $1,642,000. Finally, assume that the company sells its jobs at a selling price equal to (cost + 25% of cost markup).
Solve (2A-2C)
Smith Manufacturing currently allocates manufacturing overhead costs by plantwide overhead rate using direct labor costs. Ben Smith, a controller argues for departmental overhead rates to allocate manufacturing overhead costs to products. For department overhead rates, manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor costs in the Assembly Department. At the beginning of 20X3, the following estimates were provided for the coming year:
Machining Assembly
Direct labor-hours 30,000 60,000
Machine-hours 80,000 20,000
Direct labor cost $500,000 $900,000
Manufacturing overhead costs $420,000 $240,000
During month of the March, the accounting records of the company show the following data for Job #316:
Machining Assembly
Direct labor-hours 120 70
Machine-hours 60 5
Direct material cost $300 $200
Direct labor cost $100 $400
1) For Plant-wide Overhead Rate,
a. Compute the plant-wide…
Problem 2-18 (Algo) Job-Order Costing for a Service Company [LO2-1, LO2-2, LO2-3]
Speedy Auto Repairs uses a job-order costing system. The company’s direct materials consist of replacement parts installed in customer vehicles, and its direct labor consists of the mechanics’ hourly wages. Speedy’s overhead costs include various items, such as the shop manager’s salary, depreciation of equipment, utilities, insurance, and magazine subscriptions and refreshments for the waiting room.
The company applies all of its overhead costs to jobs based on direct labor-hours. At the beginning of the year, it made the following estimates:
Direct labor-hours required to support estimated output
28,000
Fixed overhead cost
$ 364,000
Variable overhead cost per direct labor-hour
$ 1.00
Required:
1. Compute the predetermined overhead rate.
2. During the year, Mr. Wilkes brought in his vehicle to replace his brakes, spark plugs, and tires. The following information was available with…
Chapter 2 Solutions
Managerial Accounting
Ch. 2.A - EXERCISE 2A-1 Activity-Based Absorption Costing...Ch. 2.A - EXERCISE 2A-2 Activity-Based Absorption Costing as...Ch. 2.A - EXERCISE 2A-3 Activity-Based Absorption Costing as...Ch. 2.A - PROBLEM 2A-4 Activity-Based Absorption Costing as...Ch. 2.A - Prob. 5PCh. 2.A -
CASE 2A-6 Activity-Based Absorption Costing and...Ch. 2.B - EXERCISE 2B-1 Overhead Rate Based on Capacity...Ch. 2.B - EXERCISE 2B-2 Overhead Rates and Capacity Issues...Ch. 2.B - Prob. 3PCh. 2.B - Prob. 4C
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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