Nerfyguns manufactures and sell battery-powered guns that shoot soft pelts retailing for prices ranging from $6 to

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Nerfyguns manufactures and sell battery-powered guns that shoot soft pelts retailing for prices ranging from $6 to $25. Nerfyguns come in 3 styles: Pistols, Rifles, and Assaults. All 3 Nerfyguns are manufactured in a common manufacturing site. Nerfyguns uses an absorption costing system that absorbs manufacturing overhead to the 3 styles based on direct material dollars. The single plantwide manufacturing overhead rate is predetermined prior to the beginning of the fiscal year using a flexible manufacturing overhead budget. Variable manufacturing overhead is budgeted to be $0.720 per direct material dollar, and annual fixed manufacturing is overhead is budgeted to be $6.5 million. All 3 styles of Nerfyguns are produced in batches of 1,000 guns. The following table summarizes the budgeted and actual results of operation for the year.
NerfyGuns Styles Actual number of units produced Budgeted variable distributation per year per 100 Budgeted production A

a. Calculate the firm wide overhead rate for the year.
b. A batch of 1,000 rifles was produced in March that incurred $145 of direct labor and $1,650 of direct materials. How much overhead is absorbed by this batch of rifles produced in March.
c. Actual overhead incurred during the year was $23,586,000. Calculate the amount of over or under absorbed overhead for the year.
d. NerfyGuns writes off any over/underabsorbed overhead to cost of goods sold. What is the effect on earnings based on the answer provided in letter c?

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Cornerstones of Managerial Accounting

ISBN: 978-0176530884

2nd Canadian edition

Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman

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