ACC 220 Lecture Notes - Lecture 8: Ovh
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I need the solution for problem 22 in Chapter for in ManagerialAccounting for Managers 3rd edition Noreen, Brewer, and Garrison.Showing all steps
Problem 4-22 Multiple Departments; Overhead Rates; Underappliedor Overapplied Overhead
Winkle, Kotter, and Zale is a small law firm that contains 10partners and 10 support persons. The firm employs a job-ordercosting system to accumulate cost chargeable to each client, and itorganized into two departments the Research and DocumentsDepartment and the Litigation Department. The firm usespredetermined overhead rates to charge the costs of thesedepartments to its clients. At the beginning of the current year,the firm's management made the following estimates for theyear:
Department | ||||||
Research and Documents | Litigation | |||||
Research hours | 20,000 | --------- | ||||
Direct attorney hour | 9,000 | 16,000 | ||||
Materials and supplies | 18,000 | 5,000 | ||||
Direct Attorney cost | 430,000 | 800,000 | ||||
Departmental overhead cost | 700,000 | 320,000 |
The predetermined overhead rate in the Research and DocumentsDepartment is based on research hours and the rate in theLitigation Department is based o direct attorney cost. The costscharged to each client are made up of three elements: materials andsupplies used, direct attorney costs incurred, and an appliedamount of overhead from each department in which work is performedo the case. Case 618-3 was initiated on February 10 and completedon June 30. During this period, the following costs and time wererecorded on the case:
Department | ||||
Research and Documents | Litigation | |||
Research hours | 18 | --------- | ||
Direct attorney hours | 9 | 42 | ||
Materials and Supplies | $50 | $30 | ||
Direct attorney cost | $410 | $2,100 |
Required:
1. Compute the predetermined overhead rates used during the yearin the Research and Documents Department and the LitigationDepartment
2. Using the rates you computed in (1) above, compute the totaloverhead cost applied to Case 618-3? Show computations bydepartment and in total for the case.
3. What would be the total cost chaged to Case-618-3? Showcomputations by department and in total for the case.
4. At the end of the year, the firm's records revealed thefollowing actual cost and operating data for all cases handledduring this year:
Department | |||||
Research and Documents | Litigation | ||||
Research hours | 23,000 | -------- | |||
Direct attorney hours | 8,000 | 15,000 | |||
Materials and supplies | $19,000 | $6,000 | |||
Direct attorney cost | $400,000$ | $275,000 | |||
Departmental overhead cost | $770,000 | $300,000 |
Determine the amount of underapplied or overapplied overheadcost in each department for the year.
Scott Company’s variable manufacturing overhead should be $2.40per standard direct labor-hour and fixed manufacturing overheadshould be $408,900 per year. |
The company produces asingle product that requires 2.6 direct labor-hours to complete.The direct labor wage rate is $20 per hour. Three yards of rawmaterial are required for each unit of product, at a cost of $4 peryard. |
Demand for the company’sproduct differs widely from year to year. Expected activity forthis year is 57,000 direct labor-hours; normal activity is 47,000direct labor-hours per year. |
Required: | |
1. | Assume that the company chooses 47,000 direct labor-hours as thedenominator level of activity. Compute the predetermined overheadrate, breaking it down into fixed and variable cost components.(Round your intermediate and final answers to 2 decimalplaces. Omit the "$" sign in your response.) |
Variablepredetermined overhead rate | $ |
Fixed predeterminedoverhead rate | |
Total predeterminedoverhead rate | $ |
2. | Assume that the company chooses 57,000 direct labor-hours as thedenominator level of activity. Repeat the computations in (1)above. (Round your intermediate and final answers to 2decimal places. Omit the "$" sign in your response.) |
Variablepredetermined overhead rate | $ |
Fixed predeterminedoverhead rate |
|
Total predeterminedoverhead rate | $ |
3. | Complete two standard cost cards as outlined below.(Round your intermediate and final answers to 2 decimalplaces. Omit the "$" sign in your response.) |
Denominator Activity: 47,000 DLHs | ||
Direct materials, 3yards at $4.00 per yard | $12.00 | |
Direct labor | ||
Variablemanufacturing overhead | ||
Fixed manufacturingoverhead | ||
Total standard costper unit | $ | |
Denominator Activity: 57,000 DLHs | ||
Direct materials, 3yards at $4.00 per yard | $12.00 | |
Direct labor | ||
Variablemanufacturing overhead | ||
Fixed manufacturingoverhead | ||
Total standard costper unit | $ | |
4. | Assume that 48,500 actual hours are worked during the year, andthat 19,100 units are produced. Actual manufacturing overhead costsfor the year are as follows: |
Variablemanufacturing overhead cost | $ 121,250 |
Fixed manufacturingoverhead cost | 394,226 |
Total manufacturingoverhead cost | $ 515,476 |
a. | Compute the standard hoursallowed for the year’s actual output. (Do not roundintermediate calculations.) |
Standard hours |
b. | Compute the missing items from the Manufacturing Overheadaccount below. Assume that the company uses 47,000 directlabor-hours (normal activity) as the denominator activity figure incomputing overhead rates, as you have used in (1) above.(Do not round intermediate calculations.Omit the "$" sign in your response.) |
Manufacturing Overhead |
Actual costs | 515,476 | Applied costs | ||
Overappliedoverhead | ||||
c. | Analyze your underapplied or overapplied overhead balance interms of variable overhead rate and efficiency variances and fixedoverhead budget and volume variances. (Input all amounts aspositive values. Leave no cells blank - be certain to enter "0"wherever required. Indicate the effect of each variance byselecting "F" for favorable, "U" for unfavorable, and "None" for noeffect (i.e., zero variance). Do not roundintermediate calculations.Omit the "$" sign inyour response.) |
Variable overheadrate variance | $ | (Click toselect)UNoneF |
Variable overheadefficiency variance | (Click toselect)UNoneF | |
Fixed overheadbudget variance | (Click toselect)UFNone | |
Fixed overheadvolume variance | (Click toselect)FNoneU | |
(Click toselect)OverappliedUnderapplied overhead | $ | (Click toselect)NoneFU |
Problem 2-24A Multiple Departments; Applying Overhead [LO2-1, LO2-2, LO2-3, LO2-7]
High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company's management made the following estimates: |
Department | ||
Molding | Painting | |
Direct labor-hours | 39,000 | 52,800 |
Machine-hours | 81,000 | 31,000 |
Direct materials cost | $190,000 | $200,000 |
Direct labor cost | $271,000 | $519,000 |
Fixed manufacturing overhead cost | $162,000 | $480,480 |
Variable manufacturing overhead per machine-hour | $2.80 | - |
Variable manufacturing overhead per direct labor-hour | - | $4.80 |
Job 205 was started on August 1 and completed on August 10. The company's cost records |
Department | ||
Molding | Painting | |
Direct labor-hours | 76 | 132 |
Machine-hours | 300 | 69 |
Materials placed into production | $936 | $1,240 |
Direct labor cost | $690 | $990 |
Required: |
1. | Compute the predetermined overhead rate used during the year in the Molding Department. Compute the rate used in the Painting Department. (Round your answers to 2 decimal places.) |
2. | Compute the total overhead cost applied to Job 205. (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount.) |
3-a. | What would be the total cost recorded for Job 205? (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount.) |
3-b. | If the job contained 22 units, what would be the unit product cost? (Round "Predetermined overhead rate" and final answer to 2 decimal places and other intermediate calculations to the nearest dollar amount.) |
4. | At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year: |
Department | ||
Molding | Painting | |
Direct labor-hours | 28,000 | 53,000 |
Machine-hours | 80,600 | 23,400 |
Direct materials cost | $165,700 | $411,000 |
Direct labor cost | $108,000 | $436,000 |
Manufacturing overhead cost | $397,280 | $699,600 |
What was the amount of underapplied or overapplied overhead in each department at the end of the year? (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount. Select "None" for no effect (i.e., zero variance).) | |