Question
Brighton Services repairs locomotive engines. It employs 100 full-time workers at $14 per hour. Despite operating at capacity, last year's performance was a great disappointment
Brighton Services repairs locomotive engines. It employs 100 full-time workers at $14 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs.
Direct materials | $ | 1,045,400 | |
Direct labor | 4,200,000 | ||
Manufacturing overhead | 975,000 | ||
Of the $975,000 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.
Job | Direct Materials | Direct Labor | ||||
101 | $ | 138,200 | $ | 490,000 | ||
102 | 103,000 | 313,000 | ||||
103 | 95,000 | 195,200 | ||||
Total manufacturing overhead | 272,200 | |||||
Total marketing and administrative costs | 120,000 | |||||
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 | Fixed | ||||
101 | $ | 30,900 | $ | 105,000 | |
102 | 28,500 | 89,200 | |||
103 | 5,600 | 13,000 | |||
$ | 65,000 | $ | 207,200 | ||
In the first quarter of this year, 40 percent of marketing and administrative cost was variable and 60 percent was fixed. You are told that Jobs 101 and 102 were sold for $855,000 and $570,000, 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.
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.
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).
d. Calculate operating profit (loss) for the first quarter of this year under actual and normal costing systems.
B.)
Predetermined Overhead Rate (Per Direct Labor-Hour) | |
Variable overhead rate | $1.30selected answer correct |
Fixed overhead rate | $1.95 |
c.)
Materials Inventory | Wages Payable | |||||||
Beg. Bal. | 0selected answer correct | 0selected answer correct | Beg. Bal. | 0selected answer correct | 0selected answer correct | |||
not attempted | 0selected answer correct | 138,200selected answer correct | 101: DMselected answer correct | not attempted | 0selected answer correct | 490,000selected answer correct | 101: DLselected answer correct | |
not attempted | 0selected answer correct | 103,000selected answer correct | 102: DMselected answer correct | not attempted | 0selected answer correct | 313,000selected answer correct | 102: DLselected answer correct | |
not attempted | 0selected answer correct | 95,000selected answer correct | 103: DMselected answer correct | not attempted | 0selected answer correct | 195,200selected answer correct | 103: DLselected answer correct | |
not attempted | 0selected answer correct | 0selected answer correct | not attempted | not attempted | 0selected answer correct | 0selected answer correct | not attempted | |
End. Bal. | 336,200 | End. Bal. | 998,200 | |||||
Variable Manufacturing Overhead | Fixed Manufacturing Overhead | |||||||
Actualselected answer correct | 65,000selected answer correct | 45,500selected answer correct | 101: Variableselected answer correct | Actualselected answer correct | 207,200selected answer correct | 68,250selected answer correct | 101: Fixedselected answer correct | |
Overappliedselected answer correct | 27,690selected answer correct | 29,064selected answer correct | 102: Variableselected answer correct | not attempted | 0selected answer correct | 43,596selected answer correct | 102: Fixedselected answer correct | |
not attempted | 0selected answer correct | 18,126selected answer correct | 103: Variableselected answer correct | not attempted | 0selected answer correct | 27,189selected answer correct | 103: Fixedselected answer correct | |
not attempted | 0selected answer correct | 0selected answer correct | not attempted | not attempted | 0selected answer correct | 0selected answer correct | not attempted | |
End. Bal. | not attempted | 0selected answer correct | 68,165selected answer correct | Underappliedselected answer correct | ||||
End. Bal. | ||||||||
Work-in-Process Inventory | Finished Goods Inventory | |||||||
Beg. Bal. | 0selected answer correct | 0selected answer correct | Beg. Bal. | 0selected answer correct | 0selected answer correct | |||
Total DMselected answer correct | 336,200selected answer correct | ????? | Total 101 Finished Goodsselected answer correct | Total 101 Finished Goods | ?????? | ?????? | Cost of Goods Sold | |
Total DLselected answer correct | 998,200selected answer correct | 488,660selected answer correct | Total 102 Finished Goodsselected answer correct | Total 102 Finished Goodsselected answer correct | 488,660selected answer correct | 0selected answer correct | not attempted | |
Total Fixed MOHselected answer correct | ????? | 0selected answer correct | not attempted | not attempted | 0selected answer correct | 0selected answer correct | not attempted | |
Total Variable MOHselected answer correct | ????? | 0selected answer correct | not attempted | End. Bal. | ||||
not attempted | 0selected answer correct | 0selected answer correct | not attempted | |||||
End. Bal. | 776,515 | |||||||
Cost of Goods Sold | Under-or Overapplied Overhead | |||||||
Beg. Bal. | 0selected answer correct | 0selected answer correct | Beg. Bal. | 0selected answer correct | 0selected answer correct | |||
Finished Goods | ???? | 0selected answer correct | Underappliedselected answer correct | 68,165selected answer correct | 27,690selected answer correct | Overappliedselected answer correct | ||
0selected answer correct | 0selected answer correct | not attempted | 0selected answer correct | 0selected answer correct | not attempted | |||
End. Bal. | 789,610 | End. Bal. | 40,475 |
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