7-7
Brighton Services repairs locomotive engines. It employs 100 full-time workers at $18 per hour. Despite operating at capacity, last years performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs Direct materials Direct labor Manufacturing overhead $1,038,400 4.140,000 1,035,000 Of the S1,035,000 manufacturing overhead, 40 percent was variable overhead and 60 percent was fixed This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow Direct Direct Labor Materials Job 101 102 103 Total manufacturing overhead Total marketing and administrative costs $137,500 $510,000 96,000 312,600 94,300 197.900 271,500 100,000 You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi's senior partner has examined Brighton Services's accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows Actual Manufacturing Overhead Variable $ 30,200 27,800 Fixed 101 102 103 $104,300 88,500 15,800 $208,600 4,900 $ 62,900 In the first quarter of this year, 30 percent of marketing and administrative cost was variable and 70 percent was fixed. You are told that Jobs 101 and 102 were sold for $856,000 and $556,000, respectively. All over- or underapplied overhead for the quarter is written off to Cost of Goods Sold Required a. Present in T-accounts the actual manufacturing cost flows for the three jobs in the first quarter of this year Materials Inventory Wages Payable Beg. bal Beg. bal End. bal End. bal Variable Manufacturing Overhead Fixed Manufacturing Overhead End. bal End. bal Work-in-Process Inventory Finished Goods Inventory Beg. bal Beg. ba Cost of goods sold End. bal End. bal Cost of Goods Sold Beg. bal Finished Goods End. bal b. Using last year's overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead. (Round your answers to 2 decimal places.) Predetermined Overhead Rate (Per Direct Labor Hour) Variable overhead rate Fixed overhead rate c. Present in T-accounts the normal manufacturing cost flows for the three jobs in the first quarter of this year. Use the overhead rates derived in requirement (b). (Do not round intermediate calculations.) Materials Inventory Wages Payable Beg. bal Beg. bal End. bal End. ba Variable Manufacturing Overhead Fixed Manufacturing Overhead End. bal End. bal Work-in-Process Inventory Finished Goods Inventory Beg. bal Beg. bal Cost of goods sold End. bal End. bal. Cost of Goods Sold Under-or Over-Applied Overhead Beg. bal. Finished Goods Beg. bal End. bal End. bal
