MANAGEMENT ACCOUNTING

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DUE MONDAY, JUNE 27 BY 11:00PM

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Predetermined Overhead Rate, Overhead Application At the beginning of the year, Ilberg Company estimated the following costs: Overhead Direct labor cost $450,000 600,000 Ilberg Company uses normal costing and applies overhead on the basis of direct labor cost. (Direct labor cost is equal to total direct labor hours worked multiplied by the wage rate.) For the month of December, direct labor cost was $39,900. Required: 1. Calculate the predetermined overhead rate for the year. Enter the percentage answer as a whole number. % of direct labor cost 2. Calculate the overhead applied to production in December. $ Overhead Variance (Over- or Underapplied), Closing to Cost of Goods Sold At the end of the year, Ilberg Company provided the following actual information: Overhead Direct labor cost $456,500 607,200 Ilberg uses normal costing and applies overhead at the rate of 75% of direct labor cost. At the end of the year, Cost of Goods Sold (before adjusting for any overhead variance) was $851,000. Required: 1. Calculate the overhead variance for the year. $ OVERAPPLIED OR UNDERAPPLIED? 2. Dispose of the overhead variance by adjusting Cost of Goods Sold. Adjusted COGS $ Predetermined Departmental Overhead Rates, Applying Overhead to Production At the beginning of the year, Hallett Company estimated the following: Cutting Department Overhead Direct labor hours Machine hours Sewing Department Total $240,000 $350,000 $590,000 31,200 101,000 132,200 150,000 150,000 Hallett uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. Actual data for the month of June are as follows: Cutting Department Sewing Department $20,610 $35,750 $56,360 2,800 8,600 11,400 13,640 13,640 Overhead Direct labor hours Machine hours Total Required: 1. Calculate the predetermined overhead rates for the cutting and sewing departments. Round your answers to the nearest cent. $ Cutting department per machine hour $ per direct labor hour Sewing department 2. Calculate the overhead applied to production in each department for the month of June. Use overhead application rates that are rounded to the nearest cent in your calculations, and round your final answers to the nearest dollar. $ Cutting department $ Sewing department 3. By how much has each department's overhead been overapplied or underapplied? $ OVERAPPLIED OR Cutting department UNDERAPPLIED? $ OVERAPPLIED OR Sewing department UNDERAPPLIED? Convert Departmental Data to Plantwide Data, Plantwide Overhead Rate, Apply Overhead to Production At the beginning of the year, Hallett Company estimated the following: Cutting Department Overhead Direct labor hours Machine hours Sewing Department Total $239,000 $350,000 $589,000 31,200 100,000 131,200 150,000 150,000 Assume that Hallett has decided to use a plantwide overhead rate based on direct labor hours. Actual data for the month of June are as follows: Overhead Cutting Department Sewing Department $20,610 $35,750 Total $56,360 Direct labor hours Machine hours 2,800 8,600 11,400 13,640 13,640 Required: 1. Calculate the predetermined plantwide overhead rate. Round your answer to the nearest cent. $ per direct labor hour 2. Calculate the overhead applied to production for the month of June. Use an overhead application rate that is rounded to the nearest cent in your calculations, and round your final answer to the nearest dollar. $ 3. Calculate the overhead variance for the month of June. $ OVERAPPLIED OR UNDERAPPLIED? At the beginning of June, Rhone Company had two jobs in process, Job 44 and Job 45, with the following accumulated cost information: Direct materials Direct labor Applied overhead Balance, June 1 Job 44 Job 45 $5,300 $1,300 1,400 3,100 980 2,170 $7,680 $6,570 During June, two more jobs (46 and 47) were started. The following direct materials and direct labor costs were added to the four jobs during the month of June: Job 44 Job 45 Job 46 Job 47 Direct materials $2,400 $7,160 $1,850 $1,750 740 6,420 1,000 520 Direct labor At the end of June, Jobs 44, 45, and 47 were completed. Only Job 45 was sold. On June 1, the balance in Finished Goods was zero. Required: 1. Calculate the overhead rate based on direct labor cost. Round to three decimal places. 2. Prepare a brief job-order cost sheet for the four jobs. Show the balance as of June 1 as well as direct materials and direct labor added in June. Apply overhead to the four jobs for the month of June, and show the ending balances. 3. Calculate the ending balances of Work in Process and Finished Goods as of June 30. 4. Calculate the Cost of Goods Sold for June. Amount Descriptions Refer to the list below for the exact wording of text items within your job-order cost sheets. Amount Descriptions Applied overhead Beginning balance Direct labor Direct materials Total Overhead Rate 1. Calculate the overhead rate based on direct labor cost. Round to three decimal places. The overhead rate based on direct labor cost is % Job-Order Cost Sheets 2. Prepare a brief job-order cost sheet for the four jobs. Show the balance as of June 1 as well as direct materials and direct labor added in June. Apply overhead to the four jobs for the month of June, and show the ending balances. Refer to Amount Descriptions for the exact wording of text items within your job-order cost sheets. All amount cells must have an entry; enter zeros as needed. Rhone Company Job-Order Cost Sheets For the Month of June Job 44 1 Job 45 Job 46 Job 47 2 Beginning balance 3 4 5 6 Concluding Questions 3. Calculate the ending balances of Work in Process and Finished Goods as of June 30. Work in Process: Finished Goods: $ $ 4. Calculate the Cost of Goods Sold for June. Cost of Goods Sold: $ 1. Assigning Support Department Costs by Using The Direct Method Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to Quillen: Support Departments S1 Direct costs S2 Producing Departments Cutting Sewing $180,000 $150,000 $122,000 $90,500 30 63 147 1,200 16,000 4,000 Normal activity: Number of employees Maintenance hours Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Cutting and the other for Sewing.) Enter your answers as decimal values. S1 S2 Cutting Sewing 2. Allocate the support department costs to the producing departments by using the direct method. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enter zero ("0"). Support Departments S1 Producing Departments S2 Cutting Sewing $ $ $ $ $ $ $ $ Direct costs Allocate: S1 S2 Total 2. Check My Work4 more Check My Work uses remaining. Sequential Method Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to Quillen: Support Departments Producing Departments S1 Direct costs S2 Cutting Sewing $180,000 $150,000 $122,000 $90,500 30 63 147 1,200 16,000 4,000 Normal activity: Number of employees Maintenance hours Assume that Quillen uses the sequential method to allocate support department costs. S1 is allocated first, then S2. Required: 1. Calculate the cost assignment ratios to be used under the sequential method for S2, Cutting, and Sewing. Enter your answers as decimal values, carried out to four decimal places, if necessary. Allocation ratios for S1: S2 Cutting Sewing Allocation ratios for S2: Cutting Sewing 2. Allocate the overhead costs to the producing departments by using the sequential method. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enter zero ("0"). Support Departments Allocate: S1 $ Direct costs S1 Producing Departments S2 $ Cutting $ Sewing $ S2 $ Total $ $ $ 1 predetermined overhead rate for the year=overhead cost/activity base=$450,000/(600,000) =75% 2 39,900*75%=29,925 3 Applied overhead = Overhead rate Actual direct labor cost Question 2 Applied overhead = Overhead rate Actual direct labor cost 607,200*75%=455,400 Actual overhead = 456,500 Applied overhead= 455,400 Overhead variance= 1100 Part 2 Unadjusted COGS=$851,000+$1100=852,100 Question 3 1 Cutting department =241,000/150,000=1.61 Sewing department=350,000/101,000=3.47 2 Cutting department=1.61*13,640=21960.4 Sewing department=3.47*8,600=29801.98 3 Cutting department 21960.4-20610=1350.4 underlapped Sewing department 29801.98-35750=-5948.02 overlapped Question 4 1 Overhead rate = Total overhead costs/ Total machine-hours $56,360/13,640=4.13 2 4.13*13,640=56,333.2 56,333-56,360=26.8 overlapped Question 5 Since the predetermined overhead rate is not given, it must be calculated from BWIP amounts using either Job 44 or Job 45. Using Job 44 980/1400=70% Job 44 Job 45 Job 46 Balance beginning at June 1 7,680 6,570 Direct materials 2,400 7,160 1,850 1750 Direct Labor 740 6,420 1,000 520 Applied overhead 518 4,494 700 364 Totals 13,338 24644 3550 2,634 0 Job 47 0 3. By the end of June, Jobs 44, 45, and 47 have been transferred out of Work in Process. The ending balance in Work in Process consists of Job 46. Work in process, June 30 $3,550 While three jobs (44, 45, and 47) were transferred out of Work in Process and into Finished Goods during June, only two jobs remain (Jobs 44 and 47). Finished goods, June 1$0 Job 44 13,338 Job47 1,675 Finished goods, June 30 $15013,350 4. One job, Job 45, was sold during June. Cost of goods sold $24,644 Question 6 1. Allocation ratios for S1 based on number of employees: Cutting = 0.30 Sewing = 0.70 Allocation ratios for S2 based on number of maintenance hours Cutting = 0.80 Sewing = 0.20 Direct cost S1 S2 180,000 150,000 cutting 122,000 sewing 90,500 Allocate S1 (180,000) S2 - Total 0 Question 7 - (150,000) 0 122,000 120,000 296,000 90,500 30,000 246,500