123 Assessment 2 Part 3: Analysis of Overhead Using a Predetermined Rate Scenario: Atchison Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows: 45655202 Direct labor-hours 8 9 Variable overhead costs 10 Fixed overhead costs 11 Total overhead 12 13 150,000 180,000 210,000 $1,155,000.00 $1,386,000.00 712,800 712,800 $1,617,000.00 712,800 $1,867,800.00 $2,098,800.00 $2,329,800.00 The expected volume is 180,000 direct labor-hours for the entire year. The following information is for September, when Jobs 6023 and 6024 were completed: 15 Inventories, September 1 16 Materials and supplies $ 31,500 17 Work in process (Job 6023) $162,000 18 Finished goods $337,500 19 Purchases of materials and supplies 20 Materials $445,500 21 Supplies $ 49,500 22 Materials and supplies requisitioned for production 23 Job 6023 24 Job 6024 $148,500 123,750 25 Job 6025 84,150 26 Supplies 27 19.800 $376,200 28 Factory direct labor-hours (DLH) 29 Job 6023 10,500 DLH 30 Job 6024 9,000 DLH 31 Job 6025 6.000 DLH 32 Labor costs 33 Direct labor wages (all hours @ $9) $229,500 34 Indirect labor wages (12,000 hours) 51,000 35 Supervisory salaries 118,800 36 Building occupancy costs (heat, light, depreciation, etc.) 37 Factory facilities $21,450 38 Sales and administrative offices 8,250 39 Factory equipment costs. 40 Power 13,200 41 Repairs and maintenance 4,950 42 Other 8.250 43 $26,400 5 REQUIRED 16 Answer the following questions: 47 48 49 59 50 1. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Note: Regardless of your answer to requirement [1], assume that the predetermined overhead rate is $10 per direct labor-hour. Use this amount in answering requirements [2] through [5].) 2. Compute the total cost of Job 6023 when it is finished. 3. How much of factory overhead cost was applied to Job 6025 51 during September? 4. What total amount of overhead was applied to jobs during 52 September? 53 5. Compute actual factory overhead incurred during September. Answers 6. At the end of the year, Atchison Company had the following 5 account balances: 6 7 Overapplied Overhead 8 Cost of Goods Sold 59 Work-in-Process Inventory 50 Finished Goods Inventory 51 $ 3,300 3,234,000 125,400 270,600 How would you recommend treating the over applied overhead, assuming that it is not material? Show the new account balances in 62 the following table: 63 64 Overapplied Overhead 65 Cost of Goods Sold 66 Work-in-Process Inventory 67 Finished Goods Inventory 68 69 70