Question
13-13: Clay Co. produces ceramic coffee mugs and pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours.
13-13: Clay Co. produces ceramic coffee mugs and pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours. Required: a. For 2016 the company's cost accountant estimated that total overhead costs incurred would be $408,750 and that a total of 54,500 direct labor hours would be worked. Calculate the amount of overhead to be applied for each direct labor hour worked on a production run. b. A production run of 750 coffee mugs used raw materials that cost $810 and used 90 direct labor hours at a cost of $9.50 per hour. Calculate the cost of each coffee mug produced. c. At the end of October 2016, 530 coffee mugs made in the production run in part b had been sold and the rest were in ending inventory. Calculate (1) the cost of the coffee mugs sold that would have been reported in the income statement and (2) the cost included in the April 30, 2016, finished goods inventory.
13-16: Creative Lighting, Inc., makes specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of the company's fiscal year, $56,520 of manufacturing overhead was applied to Work in Process Inventory using the predetermined overhead application rate of $6 per direct labor hour. Required: a. Calculate the number of hours of direct labor used during June. b. Actual manufacturing overhead costs incurred during June totaled $49,340. Calculate the amount of over- or underapplied overhead for June. c. Identify two possible explanations for the over- or underapplied overhead. d. Explain the accounting appropriate for the over- or underapplied overhead at the end of June.
3 13-28: Buck & Company incurred the following costs during August: Raw materials purchased $44,140 Direct labor ($12.50 per hour) $57,500 Manufacturing overhead (actual) $90,300 Selling expenses $31,800 Administrative expenses $14,700 Interest expense $6,400 Manufacturing overhead is applied on the basis of $20 per direct labor hour. Assume that overapplied or underapplied overhead is transferred to cost of goods sold only at the end of the year. During the month, 4,200 units of product were manufactured and 4,400 units of product were sold. On August 1 and August 31, Buck & Company carried the following inventory balances: Aug. 1 Aug. 31 Raw materials $ 19,600 $ 17,900 Work in process $ 53,200 $ 57,400 Finished goods $ 41,800 $ 32,700 Required: a. Prepare a statement of cost of goods manufactured for the month of August and calculate the average cost per unit of product manufactured. b. Calculate the cost of goods sold during August. c. Calculate the difference between cost of goods manufactured and cost of goods sold. How will this amount be reported in the financial statements? d. Prepare an income statement for Buck & Company for the month of August. Assume that sales for the month were $272,800 and the company's effective income tax rate was 34%.
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