ABC company has made some major accounting changes. The controller has decided to combine direct labor...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
ABC company has made some major accounting changes. The controller has decided to combine direct labor cost with overhead. The company has created two manufacturing cells, each capable of producing radiator cell and water pump cell. The output of both cells is sold to a division within the corporation. Product-level overhead costs outside the cells are assigned to each cell using appropriate drivers. Facility-level costs are allocated to each cell on basis of square footage. The budgeted direct labor and overhead costs are as follows: Direct labor costs Direct overhead Product sustaining Facility level Total conversion cost Water Pump Radiator Cell Cell $ 190,000 $ 110,000 720,000 360,000 269,990 107,800 180,000 90,000 $ 1,359,990 $ 667,800 The predetermined conversion cost rate is based on available production hours in each cell. The radiator cell has 40,500 hours available for production The water pump cell has 22.500 hours available for production Conversion costs are applied to units produced by multiplying the conversion rate by the actual time required to produce the units All units produced are sold. Any conversion cost variance is closed to Cost of Goods Sold. Other actual results for the year are as follows: Direct materials purchased and issued Direct labor costs Overhead 81,000 units produced 90,000 units produced $1,500,000 300,000 1,890,000 0.5 hour to produce one unit 0.25 hour to produce one unit Required: You will be graded on the accuracy of your answer along with using proper account titles. 1. Calculate the predetermined conversion cost rates for the Radiator cell and the Water Pump cell. Use cell referencing to calculate your rates 2. Prepare all the journal entries using the backflush accounting. Assume two trigger points (1) the purchase of raw materials and (2) the completion of goods as the second trigger point. 3. Redo all the journal entries using the backflush accounting, but assume the second trigger point is the sales of goods. 4. Redo all the journal entries using the backflush accounting, but assume there is one trigger point and that trigger point is sales of goods. 5. Explain why a company would use the backflush approach in #4 where there is only one trigger point. Solution: Provide your solution below. Make sure you use cell referencing and proper account titles for all journal entries. ABC company has made some major accounting changes. The controller has decided to combine direct labor cost with overhead. The company has created two manufacturing cells, each capable of producing radiator cell and water pump cell. The output of both cells is sold to a division within the corporation. Product-level overhead costs outside the cells are assigned to each cell using appropriate drivers. Facility-level costs are allocated to each cell on basis of square footage. The budgeted direct labor and overhead costs are as follows: Direct labor costs Direct overhead Product sustaining Facility level Total conversion cost Water Pump Radiator Cell Cell $ 190,000 $ 110,000 720,000 360,000 269,990 107,800 180,000 90,000 $ 1,359,990 $ 667,800 The predetermined conversion cost rate is based on available production hours in each cell. The radiator cell has 40,500 hours available for production The water pump cell has 22.500 hours available for production Conversion costs are applied to units produced by multiplying the conversion rate by the actual time required to produce the units All units produced are sold. Any conversion cost variance is closed to Cost of Goods Sold. Other actual results for the year are as follows: Direct materials purchased and issued Direct labor costs Overhead 81,000 units produced 90,000 units produced $1,500,000 300,000 1,890,000 0.5 hour to produce one unit 0.25 hour to produce one unit Required: You will be graded on the accuracy of your answer along with using proper account titles. 1. Calculate the predetermined conversion cost rates for the Radiator cell and the Water Pump cell. Use cell referencing to calculate your rates 2. Prepare all the journal entries using the backflush accounting. Assume two trigger points (1) the purchase of raw materials and (2) the completion of goods as the second trigger point. 3. Redo all the journal entries using the backflush accounting, but assume the second trigger point is the sales of goods. 4. Redo all the journal entries using the backflush accounting, but assume there is one trigger point and that trigger point is sales of goods. 5. Explain why a company would use the backflush approach in #4 where there is only one trigger point. Solution: Provide your solution below. Make sure you use cell referencing and proper account titles for all journal entries.
Expert Answer:
Answer rating: 100% (QA)
1 Predetermined Conversion Cost Rates Radiator Cell Predetermined Conversion Cost Rate Total Conversion Cost Available Production Hours 667800 40500 hours 1647 per hour Water Pump Cell Predetermined C... View the full answer
Related Book For
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen
Posted Date:
Students also viewed these accounting questions
-
A manufacturing company has two plants, each capable of producing smartphones, tablets, and Bluetooth headphones. The daily production capacities of each plant are as follows. Plant I Plant II...
-
Problem 23-7A Your answer is partially correct. Try again. Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials-3 pound plastic at...
-
A company's budgeted overhead (applied using direct labor hours) totaled $235,000 and its actual overhead totaled $230,300. If its budgeted direct labor hours totaled 5,000, and its actual direct...
-
Consider Southeast Home Care, which is a for-profit business. In 2020, its net income was $1,500,000 and it distributed $500,000 to owners in the form of dividends. Its beginning-of-year equity...
-
A trust company offers three-year compound-interest GICs earning 4.8% compounded monthly or 4.9% compounded semiannually. Which rate should an investor choose?
-
Determine the sum or difference in clock 6 arithmetic. 4 + 6 6. 3 2.
-
Repeat Problem 7.4 for the scheme based on the Runge-Kutta method of the second order (7.51).
-
Allen Young has always been proud of his personal investment strategies and has done very well over the past several years. He invests primarily in the stock market. Over the past several months,...
-
Which approach is NOT related to expatriate compensation? Groupof answer choices-Going rate-Balance sheet-Piecemeal-Host country based 2 answers
-
Richard McCarthy (born 2/14/64; Social Security number 100-10-9090) and Christine McCarthy (born 6/1/1966; Social security number 101-21- 3434) have a 19-year-old son (born 10/2/99 Social Security...
-
PROBLEM 1: Data about Cisco Company's production and inventories for the month of June are as follows: P 143,440 Purchases of direct materials Fill in the missing amounts, labeled A through O, in the...
-
Suppose you hold a $1000 position in a stock and assume you have a sample of 30 daily returns on the stock with the sample mean 0.0008 and the sample standard deviation 0.1035. The smallest 10...
-
Fill in the missing number from the sources and uses of funds table. ( Do not include any commas or $ signs ) Sources of Funds Investment from Principals $ ? ? ? ? Equity Financing $ 1 2 5 , 0 0 0...
-
Extreme Manufacturing Company provides the following ABC costing information: Activities Account inquiry Account billing Account verification accounts Correspondence letters Total costs Total Costs...
-
Merrimack Clinic plans to purchase a new centrifuge machine for its Yukon facility. The machine costs $567,000 and is expected to have a useful life of 8 years, with a terminal disposal value of...
-
a. What is the present value of $280,000 to be received after 40 years with a 16 percent discount rate? Use Appendix B as an approximate answer, but calculate your final answer using the formula and...
-
North Company designs and manufactures machines that facilitateDNA sequencing. Depending on the intended purpose of each machineand its functions, each machine is likely to be unique. The jobcostin 2...
-
U.S. households have become smaller over the years. The following table from the 2010 GSS contains information on the number of people currently aged 18 years or older living in a respondent's...
-
Head-Gear Company produces helmets for bicycle racing. Currently, Head-Gear charges a price of $230 per helmet. Variable costs are $80.50 per helmet, and fixed costs are $1,255,800. The tax rate is...
-
Using the same data found in Exercise 6.22, assume the company uses the FIFO method. Required: Prepare a schedule of equivalent units, and compute the unit cost for the month of December. In Exercise...
-
Jason Rogers works full-time for UPS and runs a lawn-mowing service part-time after work during the warm months of April through October. Jason has three men working with him, each of whom is paid $6...
-
8. Ryder leased a truck to Florida Food Service; Powers, an employee, drove it to make deliveries. He noticed that the door strap used to close the rear door was frayed, and he asked Ryder to fix it....
-
9. A new truck, manufactured by General Motors Corp. (GMC), stalled in rush hour traffic on a busy interstate highway because of a defective alternator, which caused a complete failure of the truck's...
-
10. A prison inmate bit a hospital employee. The employee sued the state for negligence and lack of supervision, claiming a fear of AIDS. The plaintiff had tested negative for HIV three times, and...
Study smarter with the SolutionInn App