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1.) Company has two products: A and B. The annual production and sales of Product A is 1,950 units and of Product B is 1,350

1.)

Company has two products: A and B. The annual production and sales of Product A is 1,950 units and of Product B is 1,350 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next period is $101,600.

The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows:

Activites Cost Pools Estimated Overhead Costs Product A Product B Total
Activity 1 $31394 1250 850 2100
Activity 2 $17882 1950 450 2400
General Factory $52324 785 960 1745
Total $101600

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.) The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to:

A.) $7.45

B.) $42.33

C.) $59.98

D.) $9.17

2.)

During February, Irving Corporation incurred $93,000 of actual Manufacturing Overhead costs. During the same period, the Manufacturing Overhead applied to Work in Process was $88,000.

The journal entry to record the application of Manufacturing Overhead to Work in Process would include a:

A.) credit to Work in Process of $93,000

B.) debit to Manufacturing Overhead of $88,000

C.) credit to Manufacturing Overhead of $88,000

D.) debit to Work in Process of $93,000

3.)

Selling Price $148

Units in Beginning Inventory 0
Units Produced 3200
Units Sold 2870
Units in Ending Inventory 330
Variable Cost per unit:
Direct Materials $45
Direct Labor $23
Variable Manufacturing Overhead $7
Variable Selling and Administrative $19
Fixed Costs:
Fixed Manufacturing Overhead $112000
Fixed Selling and Administrative Expenses $34440

The total gross margin for the month under absorption costing is:

$109,060

$20,090

$144,180

$154,980

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