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Homework answers / question archive / William Carey University - ACC 222 Chapter 17 Job Order Cost Systems and Overhead Allocations TRUE / FALSE Questions 1)An increase in an activity base must cause an increase in actual overhead costs incurred for that base to be considered a cost driver

William Carey University - ACC 222 Chapter 17 Job Order Cost Systems and Overhead Allocations TRUE / FALSE Questions 1)An increase in an activity base must cause an increase in actual overhead costs incurred for that base to be considered a cost driver

Accounting

William Carey University - ACC 222

Chapter 17 Job Order Cost Systems and Overhead Allocations

TRUE / FALSE Questions

1)An increase in an activity base must cause an increase in actual overhead costs incurred for that base to be considered a cost driver.

 

 

 

 

 

 

  1. Overhead application rates allow overhead to be assigned at the completion of a period to help set prices.

 

 

 

 

 

 

  1. Activity based costing uses multiple activity bases to assign overhead costs to units of production.

 

 

 

 

 

 

  1. A collection of job cost sheets would be similar to a subsidiary ledger and the work-in- process account would be similar to the controlling account.

 

 

 

 

 

 

  1. A credit balance in the manufacturing overhead account at month end indicates that the actual overhead costs were less than the amount applied to jobs.

 

 

 

 

 

 

  1. A debit balance in manufacturing overhead indicates overhead applied to jobs was greater than actual overhead costs.

 

 

 

 

 

 

  1. The two steps required in Activity Based Costing are identifying separate activity cost pools and allocating each cost pool to the product using an appropriate cost driver.

 

 

 

 

 

  1. Job order costing is appropriate for businesses that produce mass quantities of identical units using the same amount of direct labor, direct materials and overhead.

 

 

 

 

 

 

  1. An overhead application rate is computed by dividing the estimated overhead costs by the expected amount of units in the activity base.

 

 

 

 

 

 

  1. When goods are sold a journal entry is made transferring the goods from cost of goods sold to finished goods.

 

 

 

 

 

 

  1. Pepsi Cola would most likely use a job order costing system.

 

 

 

 

 

 

  1. A principal objective of cost accounting systems is to ensure that cost reports to management are prepared in accordance with generally accepted accounting principles.

 

 

 

 

 

  1. Management can compute the per-unit cost of finished goods accurately only when a job order cost system is in use.

 

 

 

 

 

 

  1. A job order cost system requires the compiling of the cost of direct materials, direct labor, and manufacturing overhead applicable to each department or process for a given time period.

 

 

 

 

 

 

  1. A debit balance in the Manufacturing Overhead account at the end of the period indicates that overhead has been under-applied to jobs.

 

 

 

 

 

 

  1. Activity-based costing tracks cost to the activities that consume resources.

 

 

 

 

 

 

  1. If the manufacturing overhead account at month end has a remaining credit balance, this indicates that overhead is under-applied

 

 

 

 

 

 

  1. If actual overhead costs are less than the amount of overhead charged to production, this indicates that manufacturing overhead is over-applied

 

 

 

 

 

 

  1. The new manufacturing environment is characterized by its shift toward labor intensive production and declining manufacturing overhead costs.

 

 

 

 

 

 

  1. A cost driver is an activity base that is highly correlated with manufacturing overhead costs.

 

 

 

 

 

 

  1. Job order costing cannot be used for a service company.

 

 

 

 

 

 

  1. An activity-based costing system cannot help managers make better product pricing decisions.

 

 

 

 

 

 

  1. In activity-based costing, only one cost driver should be used in applying overhead.

 

 

 

 

 

 

  1. Activity-based costing systems always result in more accurate measurements of unit costs.

 

 

 

 

 

  1. An overhead application rate is a device used to assign overhead costs to units of product in proportion to some "activity base" that can be traced directly to the manufactured products.

 

 

 

 

 

 

Multiple Choice Questions

 

 

  1. Which of the following costing systems would always use job cost sheets?
    1. Job order costing.
    2. Process costing.
    3. Activity-based costing.
    4. All three systems.

 

 

 

 

  1. The basic types of cost accounting systems are:
    1. Job order cost systems, activity based cost systems, and process cost systems.
    2. Direct cost systems and indirect cost systems.
    3. Completed job cost systems and work in process cost systems.
    4. Fixed cost systems and variable cost systems.

 

 

 

 

  1. A job order cost system would be appropriate in the manufacture of:
    1. Paints.
    2. Custom-made furniture.
    3. Breakfast cereal.
    4. Standard-grade plywood.

 

 

 

 

  1. Under a job order cost system, costs are accumulated for:
    1. Each department in the production cycle.
    2. Each batch of production, known as a job or lot.
    3. Each individual unit produced.
    4. Each job supervisor.

 

 

 

 

  1. A job cost sheet usually contains a record of each of the following except:
    1. The cost of direct materials charged to a particular job.
    2. The overhead costs actually incurred on a particular job.
    3. The cost of direct labor charged to a particular job.
    4. The overhead cost applied to a particular job.

 

 

 

 

  1. In a job cost system, the Work-in-Process Inventory controlling account may be reconciled to the total of the:
    1. Employee time cards.
    2. Materials requisitions.
    3. Work-in-Process Inventory records for each department or process.
    4. Job cost sheets.

 

 

 

 

  1. The year-end balance in the Materials Inventory controlling account is equal to:
    1. The total of the various materials subsidiary ledger accounts (the materials on hand at the end of the period.)
    2. The total amount of materials requisitioned during the period.
    3. The total amount of materials purchased during the period.
    4. The amount of materials debited to the Work-in-Process Inventory account during the period.

 

 

 

 

  1. A job order cost system traces direct materials cost to a particular job by means of:
    1. Materials requisitions.
    2. A production budget.
    3. The Materials Inventory controlling account.
    4. A debit to the job cost sheet for the job.

 

 

 

 

  1. A job cost sheet should:
    1. Contain information that summarizes all jobs finished.
    2. Contain information on each individual job in process.
    3. Contain only the direct costs of a particular job.
    4. Only be used for jobs that have been completed.

 

 

 

 

  1. The employee time card for John Winter indicates that he spent last week performing routine maintenance on factory machinery. Payments made to Winter for last week's work should be:
    1. Debited to Work in Process Inventory.
    2. Credited to the Direct Labor account.
    3. Debited to the Direct Labor account.
    4. Debited to the Manufacturing Overhead account.

 

 

 

 

  1. When a job is completed:
    1. Cost of goods sold is debited.
    2. Work-in-process inventory is debited.
    3. Finished goods inventory is credited.
    4. None of the above.

 

 

 

 

  1. Which of the following is a characteristic of manufacturing overhead in a job order cost system?
    1. It is indirectly traceable to specific jobs or units.
    2. It includes the cost of all labor relating to manufacturing operations.
    3. It is assigned to units produced by means of an overhead application rate.
    4. It includes the cost of direct materials used and of indirect labor.

 

 

 

 

  1. Debits to the Manufacturing Overhead account record:
    1. The actual amounts of overhead costs incurred during a period.
    2. The amount of overhead applied to production during a period.
    3. The amount of overhead incurred on a specific job.
    4. All conversion costs of a period.

 

 

 

 

  1. At the end of the accounting period, applied overhead was larger than actual overhead by a material amount. The over-applied overhead should be:
    1. Treated as an extraordinary gain.
    2. Closed into Cost of Goods Sold.
    3. Apportioned among Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.
    4. Ignored; actual overhead is determined only for internal control purposes.

 

 

 

 

  1. All of the following are advantages of developing a predetermined overhead application rate except:
    1. Short-run fluctuations in volume of output are normalized.
    2. In a job order system, unit costs can be determined as soon as jobs are completed.
    3. The overhead application rate facilitates assigning overhead costs to the ending inventory of work in process.
    4. Actual overhead will always be less than applied overhead.

 

 

 

 

  1. The advantage of using a predetermined overhead application rate is that:
    1. Units produced are charged with a "normal" amount of manufacturing overhead regardless of whether they are produced in a high-volume month or a low-volume month.
    2. Overhead costs will be limited to the predetermined amount.
    3. Entries need not be made to record actual overhead costs incurred.
    4. The unit cost of production will be lower than it would be if actual overhead costs were assigned to units produced.

 

 

 

 

  1. A predetermined overhead application rate:
    1. Is used in a job order cost system but cannot be used in a process cost system.
    2. Can be determined by dividing budgeted direct labor cost by the budgeted factory overhead costs.
    3. Is not generally accepted for financial reporting purposes.
    4. Tends to avoid wide variations in per-unit overhead costs because of short-run changes in volume.

 

 

 

 

  1. Under-applied overhead at the end of a month:
    1. Results when actual overhead costs are less than amounts applied to work in process.
    2. Indicates a poorly designed cost accounting system.
    3. Is represented by a debit balance remaining in the Manufacturing Overhead account.
    4. Is represented by a credit balance remaining in the Manufacturing Overhead account.

 

 

 

 

  1. Which of the following statements is  about activity-based costing?
    1. Only one activity should be used for a company.
    2. Many different activity bases are used in applying overhead.
    3. There can only be one cost driver.
    4. Direct materials and direct labor are applied to work-in-process based upon cost drivers.

 

 

 

 

  1. Which of the following is not a commonly used cost accounting system?
    1. Manufacturing yield costing.
    2. Job order costing.
    3. Process costing.
    4. Activity-based costing.

 

 

 

 

  1. The type of cost accounting system best suited to a particular company depends on:
    1. The nature of the company's manufacturing operations.
    2. The requirements set forth by the FASB.
    3. Government regulations.
    4. The type of cost drivers available.

 

 

 

 

  1. Manufacturing overhead is:
    1. A direct cost that can traced to a specific job.
    2. An indirect cost that can be traced to a specific job.
    3. A direct cost that cannot be traced to a specific job.
    4. An indirect cost that cannot be traced to a specific job.

 

 

 

 

  1. In an activity-based costing system, manufacturing overhead costs are divided into separate:
    1. Cost drivers.
    2. Activity cost pools.
    3. Activity bases.
    4. Indirect cost centers.

 

 

 

 

  1. Benefits of activity-based costing include all of the following except:
    1. More accurate measures of product costs.
    2. More accurate evaluations of product profitability.
    3. A better understanding of what "drives" manufacturing overhead costs.
    4. More subjective product pricing decisions.

 

 

 

 

  1. Manufacturing overhead is:
    1. A product cost.
    2. An indirect cost.
    3. A manufacturing cost.
    4. All three of the above.

 

 

 

 

  1. An activity-based costing system would probably not be appropriate if:
    1. A company produces more than one product line.
    2. A company produces only one product.
    3. A company is highly automated.
    4. A company has more than one production facility.

 

 

 

 

  1. Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that:
    1. Overhead is an indirect cost which cannot be traced easily and directly to specific units of product.
    2. Overhead is always larger in dollar amount than either direct materials or direct labor.
    3. The amounts of direct material and direct labor applicable to each unit of production cannot be determined as easily as the amount of overhead.
    4. Overhead is always equal to a constant percentage of direct labor costs.

 

 

 

 

  1. An activity base is said to be a "driver" of overhead costs when the activity base:
    1. Is independent of the amount of overhead cost incurred.
    2. Results in an overhead application rate greater than 100%.
    3. Is a causal factor in the amount of overhead cost incurred.
    4. Is the largest of the various types of expenditures classified as manufacturing overhead.

 

 

 

 

  1. Which of the following would likely be the most appropriate cost driver to allocate machinery set-up costs to products?
    1. Machine hours.
    2. Direct labor hours.
    3. Number of production runs.
    4. Repair work orders.

 

 

 

 

  1. Using machine hours to assign manufacturing overhead to a labor intensive product line is likely to:
    1. Over-apply overhead to the product line.
    2. Under-apply overhead to the product line.
    3. Understate direct labor costs.
    4. Overstate direct labor costs.

 

 

 

 

  1. If manufacturing overhead is materially over-applied, it is best to close it to:
    1. Work-in-process inventory.
    2. Finished goods inventory.
    3. Cost of goods sold.
    4. All three in an apportioned manner.

 

 

 

 

  1. The cost of salaries paid to employees who work in a factory maintaining the heating system is considered:
    1. Direct labor.
    2. Indirect materials.
    3. Factory overhead.
    4. General and administrative costs.

 

 

 

 

  1. The account Work-in-Process Inventory
    1. Consists of completed goods that have not yet been sold.
    2. Consists of goods being manufactured that are incomplete.
    3. Consists of materials to be used in the production process.
    4. Consists of the cost of new materials used, labor but not overhead.

 

 

 

 

  1. The account Finished Goods
    1. Consists of completed goods that have not yet been sold.
    2. Consists of goods being manufactured that are incomplete.
    3. Consists of materials to be used in the production process.
    4. Consists of the cost of new materials used, labor but not overhead.

 

 

 

 

  1. A job order cost system would be suitable for which of the following:
    1. A manufacturer of laundry detergent.
    2. A manufacturer of candy bars.
    3. A sugar refinery.
    4. A sailboat builder.

 

 

 

 

  1. The document that provides information for the cost of goods manufactured is:
    1. The job cost sheet.
    2. Time cards.
    3. Material requisition.
    4. Payroll check.

 

 

 

 

  1. The Work-in-Process account in a job order accounting system will be debited for:
    1. Only direct labor and direct materials.
    2. Direct labor, direct materials, and applied overhead.
    3. Direct labor, direct materials, and actual overhead.
    4. Only direct materials and applied overhead.

 

 

 

 

  1. A job cost sheet will include:
    1. All raw materials purchased.
    2. Actual overhead.
    3. Direct labor applied to production.
    4. Selling costs.

 

 

 

 

  1. Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150% of direct labor cost, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job no. 1 was charged with direct materials of $36,000 and with overhead of $27,000. What is the total cost of job no. 1? A. $64,000.

B. $81,000.

C. $91,000.

D. Cannot be determined without additional information.

 

 

 

  1. Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process Inventory controlling account showed a debit balance of $43,125. For the two jobs in process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct labor. If the company is using a predetermined overhead application rate based on direct labor cost, the rate is:

A. 50%.

B. 100%.

C. 150%.

D. 200%.

 

 

 

 

 

  1. Edwards Auto Body uses a job order cost system. Overhead is applied to jobs on the basis of direct labor hours. During the current period, Job No. 337 was charged $425 in direct materials, $475 in direct labor, and $190 in overhead. If direct labor costs an average of $16 per hour, the company's overhead application rate is:
    1. $7.27 per direct labor hour.
    2. $6.40 per direct labor hour.
    3. $17.50 per direct labor hour.
    4. $40 per direct labor hour.

 

 

 

 

 

  1. Marty's Metal Shop uses a job order cost system. It applies overhead to jobs at a rate of 150% of direct labor costs. Job No. 2617 required $800 in direct labor costs. The job was initially budgeted to require $850 in direct labor costs. Overhead applied to Job No. 2617 during the period amounted to:

A. $850.

B. $1,200.

C. $1,275.

D. Some other amount.

 

 

 

 

 

Capri Boat Corporation uses a job order cost system and applies overhead based on a percentage of direct labor cost. Cost flows through the Work-in-Process Inventory account during March are given below:

 

 
 
 

 

 

Only Job #007 was still in process at the end of March and this job had been charged with

$40,000 in direct materials cost.

 

 

  1. Refer to the information above. The amount of direct materials cost charged to completed jobs during March was:

A. $20,000.

B. $50,000.

C. $30,000.

D. Some other amount.

 

 

 

 

 

  1. Refer to the information above. The predetermined overhead application rate at Capri Boat is what percentage of direct labor costs?

A. 38%.

B. 62%.

C. 260%.

D. 580%.

 

 

 

 

 

  1. Refer to the information above. The amount of overhead costs applied to Job #007 during March were:

A. $90,000.

B. $26,250.

C. $65,000.

D. $60,000.

 

 

 

 

 

  1. Refer to the information above. The journal entry which accounts for the $300,000 transferred out of work in process includes a debit of $300,000 to:
    1. Finished Goods.
    2. Cost of Goods Sold.
    3. Accounts Receivable.
    4. Sales.

 

 

 

 

Canfield Construction applies overhead to its projects at a rate of $65 per direct labor hour. Laborers are paid an average rate of $30 per hour. The Jefferson Apartments project was charged a total of $1,200,000 in direct materials and $450,000 in direct labor costs.

 

 

  1. Refer to the information above. Overhead applied to the Jefferson Apartments project amounted to:

A. $450,000.

B. $650,000.

C. $975,000.

D. Some other amount.

 

 

 

 

 

  1. Refer to the information above. The journal entry to transfer the completed Jefferson Apartments project to Canfield's finished goods inventory would include:
    1. A debit to the Finished Goods Inventory account of $975,000.
    2. A debit to the Finished Goods Inventory account of $2,625,000.
    3. A debit to the Finished Goods Inventory account of $1,650,000.
    4. A credit to the Work-in-Process Inventory account of $2,175,000.

 

 

 

 

 

  1. Refer to the information above. The journal entry made by Canfield to record the sale of the Jefferson Apartments project to King Development Company for $5,250,000 would include:
    1. A debit to Sales of $5,250,000.
    2. A debit to Cost of Goods Sold of $2,625,000.
    3. A credit to Finished Goods Inventory of $975,000.
    4. A debit to Finished Goods Inventory of $975,000.

 

 

 

 

Riverview Company's budget for the coming year includes $6,000,000 for manufacturing overhead, 50,000 hours of direct labor, and 250,000 hours of machine time.

 

 

 

  1. Refer to the above data. If Riverview applies overhead using a predetermined rate based on machine-hours, what amount of overhead will be assigned to a unit of output which requires 0.5 machine hours and 0.25 labor hours to complete?

A. $12.00.

B. $16.00.

C. $20.00.

D. Some other amount.

 

 

 

 

 

  1. Refer to the above data. If Riverview applies overhead using a predetermined rate based on labor-hours, what amount of overhead will be assigned to a unit of output which requires

0.5 machine hours and 0.25 labor hours to complete? A. $16.00.

B. $30.00.

C. $20.00.

D. Some other amount.

 

 

 

 

 

 

Essay Questions

 

 

  1. Accounting terminology

 

 
 

Listed below are nine technical accounting terms introduced or emphasized in this chapter:

 

Each of the following statements may (or may not) describe one of these technical terms. In the space provided below each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms.

  1. The balance remaining in the Manufacturing Overhead account when the overhead application rate used during the period is too low.
  2. The account credited as component parts are transferred into production.
  3. A schedule used to accumulate manufacturing costs and to determine the unit costs associated with a specific customer's order.
  4. The inventory account credited when the cost of goods sold is recorded.
  5. The type of cost accounting system most likely used by an oil refinery engaged in the continuous production of petroleum products.
  6. The inventory account debited when manufacturing cost accounts (such as Direct Labor or Materials Inventory) are credited.
  7. The type of cost accounting system likely to be used by a machine shop that manufactures items to the specifications provided by its customers.

 

 

 

 

 

  1. Job order cost system

Continental Company uses a job order cost accounting system. During March three jobs were completed and the costs were computed as follows: job no. 1, $89,000; job no. 2, $58,800; job no. 3, $54,000. As of March 31, the following amounts had been charged to the Work-in- Process Inventory controlling account in the general ledger:

 

 

  1.  
     

    Prepare the general journal entry to reflect the jobs completed during March:
  2. Compute the cost of the unfinished jobs at March 31. $                     Computations

 

 

 

 

 

  1. Job order cost system-journal entries

Paxton Products, which uses a job order cost system, completed the following transactions during the current month:

  1. Materials costing $75,000 were used on various jobs.
  2. Time cards of direct workers indicate direct labor costs of $125,000 for the month.
  3. Overhead is applied to jobs at a rate of 75% of direct labor cost.
  4. Jobs with total accumulated costs of $165,000 were finished during the month.
  5. Units costing $210,000 were sold during the month at sales prices totaling $390,000. All sales were on account.

In the space provided, prepare a general journal entry summarizing for the month each of the above categories of transactions. Explanations may be omitted.

 

 

 

 

 

 

 

 

 

 

  1. Job order cost system-journal entries

 

 
 

Shown below is a partial list of accounts for Miles Mfg. Co., followed by a list of transactions. Indicate the accounts that would be debited and credited in recording each transaction by placing the appropriate account numbers in the space provided. The company uses a job order cost accounting system.

 

 

 

 
 
 

 

 

 

 

 

 

 

 

 

 

  1. Job order cost system

Century Pools designs and builds custom pools and spas to the customer's order and uses a job order system. The predetermined overhead rate for the current year is 60% of direct labor cost.

At the end of the current year, Century Pools' direct labor cost totaled $170,000 and actual overhead amounted to $105,000.

A pool built for F. Becker required $32,000 of direct materials and $6,500 of direct labor. It was completed in May of the current year.

  1. Compute the total cost of the Becker pool as shown on the job cost sheet at date of completion.
  2. Compute the amount of under- or over-applied manufacturing overhead for Century Pools's operations for the current year.
  3. What disposition is made of over- or under-applied overhead at the end of the year (assume that the amount is not material)?

 

 

 

 

 

  1. Selecting an activity base

 

 
 

Listed below are six activity cost pools used by the Keaton Corporation:

 

Listed below are six activity bases used by Keaton to allocate manufacturing overhead costs to products. In the space provided next to each activity base, indicate for which of the above cost pools it is a cost driver.

  1. Number of equipment work orders related to each product line.
  2. Number of direct material purchase orders related to each product line.
  3. Number of production runs related to each product line.
  4. Square feet of direct materials warehouse space occupied by each product line.
  5. Number of machine hours required to produce each product line.
  6. Square feet of production space occupied by each product line.

 

 

 

 

 

  1. Allocating activity cost pools to products

Burgandy Corporation makes plastic and wooden picture frames. The company has assigned

$107,000 in monthly manufacturing overhead costs to two cost pools as follows: $67,000 to power costs, and $40,000 to production set-up costs. Additional monthly data is provided below:

 

 

 

Power costs are allocated to products using machine hours as an activity base. Set-up costs are allocated to products based on the number of production runs each product line requires.

  1. Allocate manufacturing overhead from the activity cost pools to each product line.
  2. Compare the total per-unit cost of manufacturing plastic frames and wooden frames.
  3. On a per-unit basis, which product line appears to be most profitable? Computations:

 

 

 

 

 

 

 

 

 

 

 

 

  1. Allocating activity cost pools to products

Laughton Corporation makes two styles of cases for compact disks, the standard case and the deluxe case. The company has assigned $210,000 in monthly manufacturing overhead to three cost pools as follows: $90,000 to machining costs, $60,000 to production set-up costs, and

$60,000 to inspection costs. Additional monthly data is provided below:

 

 

The first and last unit in each production run is inspected for quality control purposes. Inspection costs are allocated to the products based on the number of inspections required. Machining costs are allocated to products using machine hours as an activity base. Set-up costs are allocated to products based on the number of production runs each product line requires.

  1. Allocate manufacturing overhead from the activity cost pools to each product line.
  2. Compare the total per-unit cost of manufacturing standard cases and deluxe cases.
  3. On a per-unit basis, which product appears to be more profitable? Computations:

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Under- and over-applied overhead

What is meant by under-applied overhead? By over-applied overhead? Briefly explain each term.

 

 

 

 

 

  1. Objectives of a cost accounting system

What are the major objectives of a cost accounting system in a manufacturing company?

 

 

 

 

 

  1. Application of overhead

 

 
 

Pyramid Corporation manufactures a single product. As a basis for determining an overhead application rate, the production manager made the following estimates for the coming year:

 

In the following month, 19,500 units were produced, involving direct labor costs of $78,000 and requiring 1,073 machine-hours.

Determine the amount of manufacturing overhead to be applied to production during this month, assuming that the overhead application rate is based upon:

  1. Estimated total direct labor cost for the year. $                    
  2. Estimated total machine-hours for the year. $                    

 

 

 

 

 

  1. Application of overhead - missing information

Holden Corporation manufactures a single product. Overhead is applied to production during the year using a predetermined rate based on direct labor cost. During the month of April, 50,000 units of output were produced at a total direct labor cost of $425,000. The amount of overhead applied to these units was $2,125,000. Assuming total direct labor cost for the year had been estimated to be $4,125,000, calculate the amount of manufacturing overhead Holden Corporation had estimated it would incur during the year.

What is estimated total manufacturing overhead cost for the year? Computations

 

 

 

 

 

 

  1. Overhead application rate

Define the term cost driver and explain the role of this item in the computation of an overhead application rate.

 

 

 

 

 

  1. Overhead application

For a single product manufacturing company, all overhead must be assigned to the one product. Since this is the case, why would such a firm not simply assign actual overhead cost to production as it is incurred throughout the year?

 

 

 

 

 

  1. Alice Blue is a wholesale dress manufacturer. In manufacturing dresses, the following costs were incurred in March,

 

 

Projected overhead for the year was $560,000 to be allocated based on project direct labor cost of $395,000. What are the total manufacturing costs for March?

 

 

 

 

 

  1. Langdon Company manufactures custom designed toy sailboats. They use a job order costing system. Overhead is applied based on direct labor hours. Estimated overhead for 2009 is $11,840 and the company estimates they will use 7400 direct labor hours. The following events occurred in March.

(a.) The company purchased materials for $800 on account.

(b.) The production supervisor requisitioned 15 sheets of fiberglass for constructing the boats. The fiberglass was in stock and originally cost $3 a sheet.

(c.) Direct labor on the boats cost $500.

(d.) More materials were purchased for $350 on account. (e.) Indirect labor costs were $210.

(f.) A utility bill for the boat factory was $230 and was paid in cash.

(g.) A repair bill for the salesman's car was $75 and will be paid next month. (h.) Additional materials were placed into production which cost $215.

(i.) Manufacturing overhead was applied (direct labor hours during March totaled 500) (j.) One sailboat was completed which cost $325.

(k.) The completed sailboat was sold for $750. Required:

 

 

 

 

 

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