Principles of Financial Accounting, Chapters 1-17 - With Access (Looseleaf)
22nd Edition
ISBN: 9781259582394
Author: Wild
Publisher: MCG
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Chapter C, Problem 4E
1)
To determine
Computation of activity overhead rates.
2)
To determine
Assigning costs to the job.
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Nile Corp. has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
Cost Pool
Supervision of direct labor
Overhead Costs
Cost drive
Activity level
$400,000
Direct labor - hours
800,000
Machine maintenance
$108,000
Machine - hours
900,000
Facility rent
$228,000
Square feet of area
120,000
Total overhead costs
$736,000
The accounting records show the Mossman Job consumed the following resources:
Cost driver
Actual level
Direct labor - hours
260
Machine - hours
2,000
Square feet of area
60
Using the three cost pools to allocate overhead costs, what is the total amount of overhead costs to be allocated to the Mossman Job?
O A. $478.00
O B. $462.80
OC. $17,218.25
O D. $484.00
Jordan Company has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
Cost Pool Overhead Costs Cost driver Activity level
Supervision of direct labor $326,000 Direct labor-hours 900,000
Machine maintenance $132,000 Machine-hours 960,000
Facility rent $217,000 Square feet of area 100,000
Total overhead costs $675,000
The accounting records show the Mossman Job consumed the following resources:
Cost driver Actual level
Direct labor-hours 200
Machine-hours 1,500
Square feet of area 70
If direct labor-hours are considered the only overhead cost driver, what is the single cost driver rate for Jordan?
White Consulting, a real estate consulting firm, specializes in advising companies on potential new plant sites. The firm uses a job cost system with a predetermined indirect cost allocation rate computed as a percentage of expected direct labor costs. At the beginning of the year, managing partner Kenna White prepared the following plan, or budget, for the year:
Direct labor hours (professionals). . . .
16,000 hours
Direct labor costs (professionals). . . .
$2,350,000
Office rent. . . . . . . . . . . . . . . . . . . . . .
$220,000
Support staff salaries. . . . . . . . . . . . .
$940,000
Utilities. . . . . . . . . . . . . . . . . . . . . . . .
$350,000
Tibbs Resources is inviting several consulting firms to bid for work. White estimates that this job will require about
200 direct labor hours.
Requirements:
1. Compute WhiteConsulting's (a) hourly direct labor cost rate and (b) indirect cost allocation rate.
2.
Compute the…
Chapter C Solutions
Principles of Financial Accounting, Chapters 1-17 - With Access (Looseleaf)
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- Cardiff and Delp is an architectural firm that provides services for residential construction projects. The following data pertain to a recent reporting period. Activities Costs Design department Client consultation 1,700 contact hours 2,000 design hours 53,000 square feet $289,000 114,000 31,800 Drawings Modeling Project management department Supervision Billings 1,300 days 7 jobs 7 jobs $273,000 8,700 12,300 Collections Required: 1. & 2. Using ABC, compute the firm's activity overhead rates. Form activity cost pools where appropriate. Assign costs to a 8,000- square-foot job that requires 430 contact hours, 354 design hours, and 165 days to complete. (Round activity rate answers to 2 decimal places.) Activity Driver Incurred Overhead Activity Expected Costs Expected Activity Driver Activity Rate Assigned Client consultation Drawings Modeling Supervision Billings/Collection Total overhead costarrow_forwardBob Randall, cost accounting manager for Hemple Products, was asked to determine the costs of the activities performed within the company’s Manufacturing Engineering Department. The department has the following activities: creating bills of materials (BOMs), studying manufacturing capabilities, improving manufacturing process, training, employees, and designing tools. The resources costs (from the general ledger) and the times to perform one unit of each activity are provided below: Resource Cost Activities Unit Time Driver Salaries $500,000 Creating BOMs 0.5 hr. No. of BOMs Equipment 100,000 Designing Tools 5.4 hr. No. of tools designs Supplies 30,000 Improving processes 1.0 hr. Process improvement hrs Total $630,000 Training employees 2.0 hr. No. of training sessions Studying capabilities 1.0 hr. Study hrs. Total machine and labor hours (at practical capacity):…arrow_forwardFellar Corporation has identified the following information: Activity pools Materials handling Machine maintenance Cost drivers Number of material moves Number of machine hours $ 40,320 $ 32,400 Number of material moves Number of machine hours 720 81,000 Required: 1. Calculate the activity rate for each activity pool. 2. Determine the amount of overhead assigned to Fellar's products if they have the following activity demands: Product A 550 41,500 Product B 170 39,500 3. Using activity proportions, determine the amount of overhead assigned to Fellar's products.arrow_forward
- Bob Randall, cost accounting manager for Hemple Products, was asked to determine the costs of the activities performed within the company's Manufacturing Engineering Department. The department has the following activities: creating bills of materials (BOMs), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tools. The resource costs (from the general ledger) and the times to perform one unit of each activity are provided below. Resource Costs Activities Unit Time Driver Salaries $425,000 Creating BOMs 0.6 hr. No. of BOMs Equipment 92,000 Designing tools 3.7 hrs. No. of tool designs Supplies 43,000 Improving processes 1.1 hrs. Process improvement hrs. Total $560,000 Training employees 2.1 hrs. No. of training sessions Studying capabilities 2.1 hrs. Study hours Total machine and labor hours (at practical capacity): Machine…arrow_forwardSunland Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $165,900, $240,000, and $79,900, respectively. The cost driver for each activity and the estimated annual usage are number of setups 2,100, machine hours 24,000, and number of inspections 1,700. 1. Compute the overhead rate for each activity. Machine setups: $__ per setup Machining: $__ per machine hour Inspections: $__ per inspectionarrow_forwardMilan Manufacturing Company has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: Cost Pool Supervision of direct labor Machine maintenance Facility rent Total overhead costs Cost driver Activity level 920,000 Overhead Costs $794,000 Direct labor-hours $140,000 Machine-hours 1,040,000 $216,000 $1,150,000 Square feet of area 130,000 The accounting records show the Mossman Job consumed the following resources: Cost driver Actual level Direct labor-hours 230 Machine-hours 1,547 Square feet of area 50 OA. $0.86 per direct labor-hour OB. $0.80 per direct labor-hour OC. $1.16 per direct labor-hour OD. $1.25 per direct labor - hourarrow_forward
- Singh and Danzin is an architectural firm that provides services for residential construction projects. The following overhead cost data are from the current period. Budgeted Costs Budgeted Activity Usage contact Activity Client consultation $ 292,500 1,500 hours design hours Drawings 130,000 2,000 1. Compute an activity rate for each activity using activity-based costing. 2. Allocate overhead cost to a job that requires 60 contact hours and 355 design hours. 1. Compute an activity rate for each activity using activity-based costing. (Round "Activity rate" to 2 decimal places.) Budgeted Cost Activity Budgeted Activity Usage Activity Rate Client consultation Drawings 2. Allocate overhead cost to a job that requires 60 contact hours and 355 design hours. (Round "Activity Rate" to 2 decimal places and other answers to the nearest whole dollar amount.) Activity Activity Usage Activity Rate Allocated Cost Client consultation Drawingsarrow_forwardA company manufactures two products, Drills and Saws. Their total estimated overhead cost forthe year is $1,044,000 and expected labor hours are 72,600 hours; 32,600 for drills and 40,000for saws. The company is considering using ABC for applying overhead to their products, instead of asingle traditional overhead rate. They have broken down their overhead costs into the followingcost pools and cost drivers.arrow_forwardAs the firm’s accountant you are required to write a report explaining your general approach to the use of cost accounts and in particular the problems of overhead costing. The company has two producing departments, machining and assembly, and one service department, the canteen. Direct departmental overhead for the coming year is estimated as machining K50,000, assembly K40,000 and canteen K10,000. Details of estimated indirect overhead are as follows: Rates K1,000 Depreciation K9,500 Light and power K600 DEPARTMENTAL DATA No. of Cost of Kilowatt hours employees equipment square feet Machining 600 20 K10,000…arrow_forward
- Hicks Contracting collects and analyzes cost data in order to track the cost of installing decks on new home construction jobs. The following are some of the costs that they incur. Classify these costs as fixed or variable costs and as product or period costs. A. Lumber used to construct decks ($12.00 per square foot) B. Carpenter labor used to construct decks ($10 per hour) C. Construction supervisor salary ($45,000 per year) D. Depreciation on tools and equipment ($6,000 per year) E. Selling and administrative expenses ($35,000 per year) F. Rent on corporate office space ($34,000 per year) G. Nails, glue, and other materials required to construct deck (varies per job)arrow_forwardFranklin Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows. Expected Costs Direct labor Direct materials Fringe Benefits: Home 1 2 3 Total Indirect Materials: Assume Franklin needs to allocate two major overhead costs ($67,200 of employee fringe benefits and $18,080 of Indirect materials costs) among the three jobs. Required Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. Note: Round "Allocation rate" to 2 decimal places. Home 1 2 3 Total Expected Costs Direct labor Direct materials Fringe benefits Indirect materials Total cost Home 1 $ 61,000 107,000 The cost components to determine the total cost of each house: Home 1 Home 2 Allocation Rate x Weight of Base = Allocated Cost X $ 0 0 0 $ Home 2 $ 101,000 148,000 X X Allocation Rate x Weight of Base 0 X $ 0 = = = Home 3 $ 174,000 197,000 = = $ = Allocated Cost $ 0 0 $ $ 0…arrow_forwardMorgana Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $175,000, $358,400, and $68,900, respectively. The cost driver for each activity and the estimated annual usage are number of setups 2,500, machine hours 25,600, and number of inspections 1,300. Compute the overhead rate for each activity. Machine setups $ per setup Machining 2$ per machine hour Inspections $ per inspection %24arrow_forward
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