ACTG 2300 Lecture Notes - Lecture 3: Gross Margin, Income Statement, Finished Good

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brownhornet492

7 Nov 2017

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What is done with it: journal entries and t-accounts in job-order costing. (appendix 3a) the predetermined overhead rate and capacity. Actual overhead costs are not assigned to jobs: a predetermined overhead rate is used to assign overhead cost to products and services. It is: based on estimated data, established before the period begins, why use estimated data, waiting until the year is over to determine actual overhead costs would be too late. Managers want cost data immediately: overhead rates, if based on actual costs and activity, would vary substantially from month to month. Much of this variation would be due to random changes in activity. The formula for computing a predetermined overhead rate is: Assume that the company referred to on the job cost sheet applies overhead costs to jobs on the basis of direct labor-hours. In other words, direct labor-hours is the allocation base.

Related Questions

EXERCISE 3-14 Computing Predetermined Overhead Rates and Job Costs [LO3-1, L03-2, L03-3, LO3-7] Moody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production ...... Fixed manufacturing overhead cost .... Variable manufacturing overhead cost per machine-hour ....... 100,000 $650,000 $3.00 Required: 1. Compute the predetermined overhead rate. 2. During the year, Job 400 was started and completed. The following information was available with respect to this job: $450 Direct materials requisitioned ..... Direct labor cost ... Machine-hours used ...... $210 40 Compute the total manufacturing cost assigned to Job 400. During the year, the company worked a total of 146,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,350,000. What is the amount of underap- plied or overapplied overhead for the year? If this amount were closed out entirely to Cost of Goods Sold would the journal entry increase or decrease net operating income?

WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine hours, and the rate in the Fabrication Department is based on direct labor-hours. At the beginning of the year, the companyâs management made the following estimates for the year:

	Department
	Preparation		Fabrication
Machine-hours		83,000		39,000
Direct labor-hours		38,500		59,000
Direct materials cost	$	191,000	$	201,000
Direct labor cost	$	286,000	$	523,000
Fixed manufacturing overhead cost	$	282,200	$	560,500
Variable manufacturing overhead per machine-hour	$	2.20		-
Variable manufacturing overhead per direct labor-hour		-	$	4.20

Job 127 was started on April 1 and completed on May 12. The company's cost records show the following information concerning the job:

	Department
	Preparation			Fabrication
Machine-hours		370		72
Direct labor-hours		71		130
Direct materials cost	$	944	$	1,160
Direct labor cost	$	730	$	1,000

Requred:

1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department. (Round predetermined overhead rate to 2 decimal places.)

2. Compute the total overhead cost applied to Job 127. (Round predetermined overhead rate to 2 decimal places and round your final answer to nearest whole dollar.)

3-a. What would be the total cost recorded for Job 127? (Round your predetermined overhead rate and intermediate calculations to 2 decimal places and round your final answer to nearest whole dollar.)

3-b. If the job contained 32 units, what would be the unit product cost? (Round predetermined overhead rate and final answer to 2 decimal places.)

4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year: (Round predetermined overhead rate to 2 decimal places.)

	Department
	Preparation		Fabrication
Machine-hours		82,700		23,500
Direct labor-hours		33,000		56,000
Direct materials cost	$	160,200	$	421,000
Manufacturing overhead cost	$	473,320	$	731,600

What was the amount of underapplied or overapplied overhead in each department at the end of the year?

coppercattle818

1. Costs are accumulated and summarized by department in a job order cost system. T/F

2. As jobs are completed, their costs become part of finished goods inventory. T/F

3. A materials requisition is used as the basis for a journal entry that records the issuance of materials. T/F

4. A predetermined factory overhead rate is calculated by dividing the estimated activity base by the estimated total factory overhead costs. T/F

5. A debit balance in the factory overhead account is called over-applied factory overhead. T/F

bluehyena306

ACTG 2300 Lecture Notes - Lecture 3: Gross Margin, Income Statement, Finished Good

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