FOR Accounting Genius ONLY

1. Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $276,100 for the year, and machine usage is estimated at 125,500 hours.

For the year, $291,988 of overhead costs are incurred and 130,200 hours are used.

Compute the manufacturing overhead rate for the year. (Round answers to 2 decimal places, e.g. 1.25.)

Manufacturing overhead rate $ 2.20 per machine hour

Answer:

Manufacturing Overhead Rate = Estimated Overhead ÷ Estimated Machine Hours

= $276100 ÷ 125500 hours = $2.20 Per Machine Hour

b. What is the amount of under- or over applied overhead at December 31?

Amount $__5548______

Is the amount over applied or under applied? ___Under applied______

c. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

Account Titles and Explanation Debit Credit

_________________ __________ ______________

________________ _____________ ____________________

2. The ledger of Custer Company has the following work in process account.

Work in Process-Painting

5/31 Balance 4,600	5/31 Transferred out?
5/31 Materials 5,840
5/31 Labor 4,770
5/31 Overhead 1,830
5/31 Balance ?

Production records show that there were 540 units in the beginning inventory, 30% complete, 1,580 units started, and 1,600 units transferred out. The beginning work in process had materials cost of $2,930 and conversion costs of $1,670. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.

(a) How many units are in process at May 31?

Work in process, May 31 520 units

Answer:

	Units
Work in process, May 1	540
Started into production	1580
Total units to be accounted for	2120
Less: Transferred out	1600
Work in process, May 31	520

(b) What is the unit materials cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)

The unit materials cost for May $4.14

(c) What is the unit conversion cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)

The unit conversion cost for May $4.57

(d) What is the total cost of units transferred out in May? (Round answer to 0 decimal places, e.g. 1,225.)

Total Cost = (1600 x 4.14) + (1600 x 4.57) = $13936

(e) What is the cost of the May 31 inventory? (Round answer to 0 decimal places, e.g. 1,225.)

Cost = [(520 x 4.14) + (520 x 4.57)] = $3103

	Equivalent Units
		Materials		Conversion Costs
	Units transferred out Work in process, May 31   520 X 100%   520 X 40%	1,600   520         -  2120		1,600 -   208 1392

	Direct Materials	Conversion Costs
	$	$
Work in process, May 1	2930	1670
Costs added:
Material	5840
Conversion costs (4770 + 1830)		6600
Total Cost (A)	8770	8270
Equivalent Units (B)	2120	1392
Unit costs ($) (A ÷ B)	4.14	5.94

3. Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plant wide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.

Standard Custom

Direct labor costs $53,600 $115,000

Machine hours 1,430 1,490

Setup hours 95 390

Total estimated overhead costs are $301,800. Overhead cost allocated to the machining activity cost pool is $197,800, and $104,000 is allocated to the machine setup activity cost pool.

Compute the overhead rate using the traditional (plant wide) approach. (Round answers to 2 decimal places, e.g. 12.25 %.)

Predetermined overhead rate 179 % of direct labor cost.

Answer:

Predetermined overhead rate = Estimated overhead/ Direct labor costs

= $301,800/ ($53,600 + $115,000)

= 179%

b. Machining $ 67.74 per machine hour

Machine setup $ 214.43 per set up hour

Total machine hours = 1430+1490 = 2,920 hours

Total machine setup hours = 95 + 390 = 485 setup hours

Overhead rates using the activity-based costing approach:

Machining overhead rate = $197800/ 2920 hours = $67.74 per hour

Machine setup overhead rate = $104000/ 485 setup hours = $214.43 per setup hour

C. Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. $1,225.)

Traditional costing

Standard $__________

Custom $___________

Activity-based costing

Standard $_____ Custom$_________