EXERCISE 2-1 Compute a Predetermined Overhead Rate LO2-1 Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $123,900 and its actual total direct labor was 21,000 hours. Required: Compute the company's plantwide predetermined overhead rate for the year EXERCISE 2-2 Apply Overhead Cost to Jobs LO2-2 Luthan Company uses a plantwide predetermined overhead rate of $23.40 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $257,400 of total manufactur- ing overhead cost for an estimated activity level of 11,000 direct labor-hours The company incurred actual total manufacturing overhead cost of $249,000 and 10,800 total direct labor-hours during the period. Required Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period. EXERCISE 2-3 Computing Total Job Costs and Unit Product Costs Using a Plantwide Predetermined Overhead Rate LO2-3 Mickley Company's plantwide predetermined overhead rate is $14.00 per direct labor-hour and its direct labor wage rate is $17.00 per hour. The following information pertains to Job A-500: Direct materials Direct labor $231 $153 1 What is the total manufacturing cost assigned to Job A-500? 2. If Job A-500 consists of 40 units, what is the unit product cost for this job? EXERCISE 2-4 Computing Total Job Costs and Unit Product Costs Using Multiple Predetermined Overhead Rates LO2-4 Fickel Company has two manufacturing departments-Assembly and Testing & Packaging. The predetermined overhead rates in Assembly and Testing& Packaging are S16.00 per direct labor- hour and $12.00 per direct labor-hour, respectively. The company's direct labor wage rate is $20.00 per hour. The following information pertains to Job N-60: Testing Assembly & Packaging Direct materials Direct labor $340 $180 $40 1. 2. What is the total manufacturing cost assigned to Job N-60? If Job N-60 consists of 10 units, what is the unit product cost for this job? EXERCISE 2-9 Job-Order Costing and Decision Making LO2-1, LO2-2, LO2-3 Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimate: Machine-hours required to support estimated production .. Fixed manufacturing overhead cost Variable manufacturing overhead cost per machine-hour 165,000 $1,980,000 $2.00 Required . Compute the plantwide predetermined overhead rate. 2. During the year, Job P90 was started, completed, and sold to the customer for $2,500. The following information was available with respect to this job: Direct materials Direct labor cost Machine-hours used $830 72 Compute the total manufacturing cost assigned to Job P90 Upon comparing Job P90's sales revenue to its total manufacturing cost, the company's chief financial officer said "If this exact same opportunity walked through our front door tomorrow I'd turt down rather than making it and selling it for $2,500." a. Construct an argument (supported by numerical analysis) that refutes the chief financial 3. officer's assertion b. Construct an argument (accompanied by numerical analysis) that supports the chief financial officer's assertion. EXERCISE 2-10 Applying Overhead Cost to a Job LO2-2 Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of S5,000 for direct materials, $8,000 for direct labor, and $6,000 for overhead on its job cost sheet. Job W, which is still in pro- cess at year-end, shows charges of $2,500 for direct materials and $4,000 for direct labor Required: 1. Should any overhead cost be applied to Job W at year-end? If so, how much? Explain. 2. How will the costs included in Job W's job cost sheet be reported within Sigma Corporation's financial statements at the end of the year? connect Appendix 2A: Exercises, Problems, and Case EXERCISE 2A-1 Activity-Based Absorption Costing LO2-5 Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow Direct Labor-Hours per Unit 0.80 0.40 Annual Hubs Sprockets.. 10,000 units 40,000 units Additional information about the company follows: a. Hubs require S32 in direct materials per unit, and Sprockets require S18 b. The direct labor wage rate is $15 per hour. c. Hubs are more complex to manufacture than Sprockets and they require special processing d. The company's activity-based absorption costing system has the following activity cost pools: Expected Activity Estimated Overhead Cost Hubs SprocketsTotal 100 Activity Cost Pool (and Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (Direct labor-hours) $72,000 $200,000 5, 400 0 5,000 $816,000 8,000 6,000 24,000 300 5,000 Required. . Compute the activity rate for each activity cost pool. 2. Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing pendix 2B: Exercises, Problem, and Case EXERCISE 2B-10verhead Rate Based on Capacity LO2-6 Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty woods. The company uses a job-order costing system. The capacity of the plant is determined by the capacity of its constraint, which is time on the automated bandsaw that makes finely beveled cuts in wood according to the preprogrammed specifications of each cabinet. The bandsaw can operate up to 180 hours per month. The estimated total manufacturing overhead cost at capacity is $14,760 per month. The company bases its predetermined overhead rate on capacity, so its predetermined overhead rate is $82 per hour of bandsaw use The results of a recent month's operations appear below Sales Beginning inventories... Ending inventories Direct materials Direct labor Manufacturing overhead incurred Selling and administrative expense ...$43,740 $0 %0 $5,350 $8,860 $14,760 $8,180 150 Required 1. Prepare an income statement following the example in Exhibit 2B-1 that records the cost of unused capacity on the income statement as a period expense. 2. Why do unused capacity costs arise when the predetermined overhead rate is based on capacity