Question
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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