Azure Company predicted factory overhead for 2018 and 2019 would be $150,000 for each year. Direct labor hours were predicted as 35,000 hours for 2018 and 25,000 hours for 2019. Additional data are as follows: Sales in units Selling price per unit Direct materials and direct labor per unit 2018 40,000 $30 $15 2019 40,000 $30 $15 The company assumes that the long-run normal production level is 25,000 direct labor hours per year. The actual factory overhead cost for the end of 2018 and 2019 was $150,000. Assume that it takes one direct labor hour to make one finished unit. When the normal factory overhead rate is used, the gross profits for 2018 and 2019, respectively, are a. $400,000 and $400,000, respectively. Ob. $360,000 and $360,000, respectively. c. $720,000 and $720,000, respectively. d. $320,000 and $320,000, respectively. The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Raw Materials Work in Process Finished Goods Cost of Goods Sold $20,000 $40,000 $10,000 $50,000 If overhead is underapplied by $12,000 and considered immaterial, the journal entry would be a. Cost of Goods Sold $12,000 Manufacturing Overhead $12,000 Ob. Manufacturing Overhead $12,000 Cost of Goods Sold $12,000 c. Raw Materials $2,000 Work in Process $4,000 Finished Goods $1,000 Cost of Goods Sold $5,000 Manufacturing Overhead $12,000 d. Manufacturing Overhead $12,000 Work in Process $4,800 Finished Goods $1,200 Cost of Goods Sold $6,000 e. Manufacturing Overhead $12,000 Raw Materials $2,000 Work in Process $4,000 Finished Goods $1,000 Cost of Goods Sold $5,000 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Raw Materials Work in Process Finished Goods Cost of Goods Sold $20,000 $40,000 $10,000 $50,000 If Manufacturing overhead was $12,000 underapplied and considered material, what is the journal entry? a. Work in Process $4,800 Finished Goods $1,200 Cost of Goods Sold $6,000 Manufacturing Overhead $12,000 b. Raw Materials $2,000 Work in Process $4,000 Finished Goods $1,000 Cost of Goods Sold $5,000 Manufacturing Overhead $12,000 O c. Manufacturing Overhead $12,000 Raw Materials $2,000 Work in Process $4,000 Finished Goods $1,000 Cost of Goods Sold $5,000 d. Cost of Goods Sold $12,000 Manufacturing Overhead $12,000 Oe. Manufacturing Overhead $12,000 Work in Process $4,800 Finished Goods $1,200 Cost of Goods Sold $6,000 Which of the following is NOT a limitation of a plantwide overhead rate? a. Overhead costs tend to be underallocated to highly complex products. b. Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead. c. Overhead usage is not strictly linked to the units produced because some products are more complex and diverse than others. d. Product diversity may consume overhead activities under differing consumption ratios
