Anselmo's Kwik Print provides a variety of photocopyinf and printing services. On June 5, Anselmo invested in some computer-aided photog raphy equipment that enables customers to reproduce a picture or illustration, input it di gitally into the computer, enter text into the computer, and then print out a four-col( ur professional quality brochure. Prior to the purchase of this equipment, Kwik Print's overhead averaged $35,000 per year. After the installation of the new equipment, the total overhead increased to $85,000 per year. Kwik Print has always cost ed jobs on the basis of actual materials and labour plus overhead assigned using a pred( termined overhead rate based on direct labour hours.

Budgeted direct labour hours for the year are 5,000, and the wage rate is $6.00 per hour.

Required:

What was the predetermined overhead rate prior tc the purchase of the new equipment? (2 marks)

What was the predetermined overhead rate after the new equipment was purchased? (2 marks) Suppose Jim Hargrove brought in several items he wanted photocopied. The job required 100 sheets of paper at $0.015 each and 12 minutes of direct labour time. What would have been the cost of Jim's job ( 'n May 20 and on June 20?

(4 marks) Suppose that Anselmo decides to calculate two rhead rates, one for the photo-copying area based on direct labour hours as before, and one for the computer-aided printing area based on Machine tin le. Estimated overhead applicable to the computer aided printing area is $50,000, and forecasted usage of the machines is 2,000 hours. What are the two overhead rates? Which overhead rate system is better- one rate or two? (4 marks)

Explain how overhead is assigned to production WI en a predetermined overhead is used. (2marks)

1 2014/2015

What is an overhead variance? Explain the difference between an under applied and an over applied overhead variance. (3 marks)

Explain the difference between normal costs of goods sold and adjusted cost of goods sold. (3 marks