A

3) Many of the terms relating to overhead can become confusing as there are 3 different amounts that need to be considered; BUDGETED Overhead, APPLIED Overhead and ACTUAL Overhead. Budgeted overhead is established BEFORE an accounting period and is used to establish the predetermined overhead rate. APPLIED overhead is calculated DURING the accounting period as production jobs are completed and account transfers costs through WIP and FG inventory accounts. ACTUAL overhead is known AFTER or at the end of an accounting period once all costs have been incurred and recorded in the accounting system. The CONNECT problem gives us the APPLIED and ACTUAL amounts of overhead for Superior Company for the accounting period. WE DO NOT know the BUDGETED overhead from CONNECT but can indirectly calculate the amount if we know some additional information about Superior and the 3 formulas below and assuming that Superior Company budgeted 2,500 of direct labor at an average rate of $10 an hour: (1) Predetermined OH rate = Budgeted OH/Budgeted DL hours = $ per hour (2) Applied OH $ = Predetermined OH rate x Actual DL hours = $ from JEd) above (3) Actual DL $s = Actual DL hours x Average Rate = JE c) above a) Use the formula from (3) and your information from CONNECT to determine the ACTUAL number of direct labor hours worked during the period. Assume Superior Company We can determine the number of labor hours for Superior Company by dividing the Direct Labor dollars by an average hourly rate. Assume Superior's average direct labor hourly rate is $8 per hour. Actual Direct labor $s Should agree with JE c) in $s Average labor rate + 10.00 Assumed Actual Hours of direct labor Use I decimal place 2 b) Use the formula from (2) to calculate the predetermined overhead rate used by Superior. Applied OH $s Should agree with JE d) in Ss Actual Hours of direct labor + Calculated in a) above Predetermined OH rate Divide: Overhead/DL c) Lastly, we can determine what Superior Company's BUDGETED overhead was for the period. Use the formula from (1) above to calculate the budgeted overhead. Predetermined OH rate Calculated in b) above Budgeted DL hours x 2,500 Assumed Budgeted OH $s Calculate Using DL hours and this predetermined rate resulted in overhead being over-applied and hence, cleared in the JE i). Let's explore the difference that occurs if a different driver is used to apply overhead. If Superior Company used machine hours instead of direct labor hours to apply overhead,Using DL hours and this predetermined rate resulted in overhead being over-applied and hence, cleared in the JE i). Let's explore the difference that occurs if a different driver is used to apply overhead. If Superior Company used machine hours instead of direct labor hours to apply overhead, they would have to establish a budget for machine hours BEFORE the accounting period. Let's assume Superior budgeted, 35,000 machine hours for the month. d) Determine the new predetermined overhead rate using machine hours. Budgeted Overhead $s Calculated in c) above Budgeted machine hours + 35,000 hours Assumed Predetermined OH rate As per hour c) (3 points) Now let's assume Superior incurred 34,000 machine hours during the period. Calculate the amount of overhead that would have been applied. Actual machine hours 34,000 Should agree with JE d) in Ss Predetermined OH rate X Calculated in d) above Overhead applied Calculate: multiply f) Now compare the overhead APPLIED to the ACTUAL overhead incurred during the year. Was the overhead overapplied or underapplied? Overhead APPLIED Calculated in e) above ACTUAL Overhead Provided in CONNECT given info Difference Subtract: Underapplied if negative; Overapplied if positive g) Rewrite the JEs that would be necessary for Id and 1i 3 h) Does this situation change the actual amount of overhead costs incurred (JE 1h)? Explain using 10 to 30 words. 4) Traditional Job Costing: Superior Company's business includes three large jobs, JV28, BY92 andShow correct answers Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses $ 212, 000 Purchases of raw materials 264,000 Direct labor Administrative expenses $ 152, 000 Manufacturing overhead applied to work in process $ 369,000 Actual manufacturing overhead cost $ 355,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 53,000 $ 32,000 Work in process $ 24,000 Finished goods $ 36,000 The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $750,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $31,000. The company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Required: Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. (Hint: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.) Complete this question by entering your answers in the tabs below. Income Statement|COGS Schedule COGM ScheduleShow correct answers Prepare schedules Of COSt Of goods manufactured and cost of goods sold and an Income statement. (Hint: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.) Complete this question by entering your answers in the tabs below. Income Statement|COGS Schedule : COGM Schedule Prepare a schedule of cost of goods manufactured. Superior Company Schedule of Cost Goods Manufactured Direct materials: Beginning raw materials inventory $ 53,000 Add: Purchases of raw materials 264,000 Total raw materials available 317,000 Less: Ending raw materials inventory 32,000 Raw materials used in production $ 285,000 Direct labor 26,000 Manufacturing overhead applied to work in process 369,000 Total manufacturing costs 680,000 Add: Beginning work in process inventory 58,000 738,000 Less: Ending work in process inventory 24,000 Cost of goods manufactured $ 714,000 Complete this question by entering your answers in the tabs below. Income Statement COGS Schedule COGM Schedule Prepare a schedule of cost of goods sold. Superior Company Schedule of Cost of Goods Sold Beginning finished goods inventory 36,000 Add: Cost of goods manufactured 714,000 Cost of goods available for sale 750,000 Less: Ending finished goods inventory 81,000 Unadjusted cost of goods sold V 669,000 Less: Overapplied overhead 14,000 Adjusted cost of goods sold 655,000 Income Statement COGS Schedule COGM Schedule Prepare an income statement for the year. Superior Company Income Statement Sales 1,050,000 Cost of goods sold 655,000 Gross margin 395,000 Selling and administrative expenses: Selling expenses $ 212,000 Administrative expenses 152,000 364,000 Net operating income $ 31,000 coes Schedule