Homework answers / question archive / Accounting for OverheadProblem 1:The following information about Chachi Company's budgeted overhead are as follows: Variable overhead @ 2,000 direct labor hours              $150,000 Fixed overhead @ 2,000 direct labor hours                 $100,000 Chachi uses normal costing in accounting for the factory overhead with a predetermined rate based on direct labor hours

Accounting for OverheadProblem 1:The following information about Chachi Company's budgeted overhead are as follows: Variable overhead @ 2,000 direct labor hours              $150,000 Fixed overhead @ 2,000 direct labor hours                 $100,000 Chachi uses normal costing in accounting for the factory overhead with a predetermined rate based on direct labor hours

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Accounting for OverheadProblem 1:The following information about Chachi Company's budgeted overhead are as follows: Variable overhead @ 2,000 direct labor hours              $150,000 Fixed overhead @ 2,000 direct labor hours                 $100,000 Chachi uses normal costing in accounting for the factory overhead with a predetermined rate based on direct labor hours. They use the flexible budgets in order to calculate the predetermined rate. Actual labor hours worked during the current period is 1,700 hours. The following information pertains to the costs actually incurred by Chachi during the current period:

 

         Depreciation expense, machine                     $40,000

         Depreciation expense, factory                       $10,000

         Direct materials                                   $100,000

         Indirect labor                                      $60,000

         Indirect materials                                  $20,000

         Marketing manager's salary,

              net of 15% part-time salary in

              factory supervision                               $85,000

         Utilities expense, 70% of which

              is related to factory                               $50,000

        Office supplies                                     $15,000

        Miscellaneous factory expense                    $35,000

Administrative salaries, 5% are

related to part-timers in  

quality inspection                                $120,000

 

Required:

·     How much is the applied overhead?

·     How much is the actual overhead incurred?

·     How much is the under- or overapplied overhead during the current period?

 

 

Problem 2:

Alberton Electronics makes inexpensive GPS navigation devices and uses a normal costing system that applies overhead based on machine hours. The following 2016 budgeted data are available:

 

Variable FOH at 100,000 machine hours                           $1,250,000

Variable FOH at 150,000 machine hours                            1,875,000

Fixed FOH at all levels between 10,000

  and 180,000 machine hours                                               1,440,000

                       

Practical capacity is 180,000 hours; expected capacity is two-thirds of practical.

 

Required:

·         What is Alberton's predetermined variable OH rate?

·         What is the predetermined fixed OH rate using practical capacity?

·         What is the predetermined fixed OH rate using expected capacity?

·         During 2016, the firm records 110,000 machine hours and $2,710,000 of overhead costs.

o   How much variable overhead is applied?

o   How much fixed overhead is applied using the rates found in parts (b) and (c)?

o   Compute for the under- or overapplied overhead for 2016 using both fixed OH rates.

 

Problem 3:

The following data related to Jenel Company's utility costs for the past 6 months are as follows (based on kilowatt hours (kWh)):

 

kWhs                               Total cost ($)

120                                       4,000

200                                       6,500

150                                       4,750

180                                       5,600

220                                       7,200

175                                       5,350

      

Required:

·     Using high low method, determine the cost formula for utility costs of the company. Determine the variable component per hour and the total fixed cost associated to it.

·     Using your answers on the first requirement, compute for the expected total cost of the company if they projected their kilowatt hours used at 135 hours.

·     Using your answers on the first requirement, how many kWhs will the company expect to use if they budgeted their next month's utility costs at $5,280?

·     Compute the variable and fixed component of the utility costs of Jenel using least squares analysis and derive the cost formula based on your computations.

 

 

Problem 4:

Geo-trig Inc. has three producing departments (Sine, Cosine, and Tangent) and two service departments (Rhombus and Triangle). Data that summarize overhead activity for January are:

 

                                 Producing Departments        Service Departments

                               Sine      Cosine    Tangent     Rhombus    Triangle

Total overhead before service

department allocations .......... $50,000  $80,000   $30,000     $40,000   $20,000

Square footage

occupied ...................................... 3,000      4,000       3,000        1,000       2,500

Number of employees .......................... 50         30         20           25           10

 

Rhombus costs are distributed on the basis of square footage occupied, while Triangle costs are distributed on the basis of number of employees.

 

Required:

·     Compute the factory overhead of each producing departments after allocation of service department costs using:

o  Direct method

o  Step method, using Triangle as the first to be distributed

o  Simultaneous method

 

 

Problem 5:

Eaglehorn Company had the following overhead costs for the month of October 2019:

 

  Budgeted Actual

(Based on 4,000 machine hrs.) Actual (based on 5,000 machine hrs.)

Variable overhead $ 12,000 $ 14,560

Fixed overhead   16,000   17,890

   

The company determined that their normal operating capacity is 4,000 machine hours.

 

      Required: Calculate the following:

·     Variable overhead spending variance

·     Fixed overhead spending variance

·     Idle capacity variance

·     Total overhead variance