Overall Instructor remarks: Check Figures 1d) dr. WIP 370000 cr.MOH 370000 3b) Budgeted OH $355,200 4c) OH for ZF14 $74.000 5b) 399.644 8 Inspection for BY92 1,421 8 Total OH applied for ZF14 $52,521 9f Gross Margin % for JV28 35.79% 12 OH cost per unit 46.67 12f Sales price per unit $247.56 ) for Job JV28 Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials) $ 215,000 $ 268,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 154,000 $ 370,000 $ 351,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 58,000 $ 30,000 $ 32,000 $ 35,000 ? ? The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $31,000. The company's underapplied or overapplied overhead is closed to Cost of Goods Sold. 3) Understanding application of Overhead: Many of the terms relating to overhead can become confusing as there are 3 different amounts that need to be considered; BUDGETED Overhead, APPLIED Overhead and ACTUAL Overhead. Budgeted overhead is established BEFORE an accounting period and is used to establish the predetermined overhead rate. APPLIED overhead is calculated DURING the accounting period as production jobs are completed and account transfers costs through WIP and FG inventory accounts. ACTUAL overhead is known AFTER or at the end of an accounting period once all costs have been incurred and recorded in the accounting system. The CONNECT problem gives us the APPLIED and ACTUAL amounts of overhead for Superior Company for the accounting period. (1) Predetermined OH rate = Budgeted OH $s/Budgeted driver = $ per driver (2) Applied OH $ = Predetermined OH rate x Actual driver = $ from JE d) above a) Assume Superior applies overhead using predetermined overhead rate based on direct labor hours. Assume Superior incurred 50,000 hours of direct labor (ACTUAL HOURS) during the year, calculate the predetermined overhead rate that was used to apply the overhead amount in JE d) above. Hint: Use formula (2) above. (show 2 decimals) b) Now assume that Superior had budgeted for only 48,000 hours of direct labor. Determine the value of the overhead that would have been BUDGETED for the year. Hint: Use formula (1) above. (Show whole number) c) Instead of using direct labor hours to apply overhead, Superior could have used machine hours. Assume Superior had originally budgeted 14,000 machine hours for the year. Calculate the alternative predetermined rate. Hint: Use formula (1) above. (show 2 decimals) d) During the year, Superior actually incurred 14,500 hours of machine operating time. Calculate the amount of overhead they would had applied to WIP during the year. Hint: Use formula (2) above. e) If Superior had used machine hours to apply overhead, would their overhead have been over- or under-applied? By how much? f) Assuming any over- or under-applied overhead is cleared to COGS, rewrite the journal entry that would have been required to clear the MOH Clearing account (similar to JE i) above). g) Does this situation change the actual amount of overhead costs incurred (JE 1h)? Explain using 10 to 30 words. Overall Instructor remarks: Check Figures 1d) dr. WIP 370000 cr.MOH 370000 3b) Budgeted OH $355,200 4c) OH for ZF14 $74.000 5b) 399.644 8 Inspection for BY92 1,421 8 Total OH applied for ZF14 $52,521 9f Gross Margin % for JV28 35.79% 12 OH cost per unit 46.67 12f Sales price per unit $247.56 ) for Job JV28 Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials) $ 215,000 $ 268,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 154,000 $ 370,000 $ 351,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 58,000 $ 30,000 $ 32,000 $ 35,000 ? ? The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $31,000. The company's underapplied or overapplied overhead is closed to Cost of Goods Sold. 3) Understanding application of Overhead: Many of the terms relating to overhead can become confusing as there are 3 different amounts that need to be considered; BUDGETED Overhead, APPLIED Overhead and ACTUAL Overhead. Budgeted overhead is established BEFORE an accounting period and is used to establish the predetermined overhead rate. APPLIED overhead is calculated DURING the accounting period as production jobs are completed and account transfers costs through WIP and FG inventory accounts. ACTUAL overhead is known AFTER or at the end of an accounting period once all costs have been incurred and recorded in the accounting system. The CONNECT problem gives us the APPLIED and ACTUAL amounts of overhead for Superior Company for the accounting period. (1) Predetermined OH rate = Budgeted OH $s/Budgeted driver = $ per driver (2) Applied OH $ = Predetermined OH rate x Actual driver = $ from JE d) above a) Assume Superior applies overhead using predetermined overhead rate based on direct labor hours. Assume Superior incurred 50,000 hours of direct labor (ACTUAL HOURS) during the year, calculate the predetermined overhead rate that was used to apply the overhead amount in JE d) above. Hint: Use formula (2) above. (show 2 decimals) b) Now assume that Superior had budgeted for only 48,000 hours of direct labor. Determine the value of the overhead that would have been BUDGETED for the year. Hint: Use formula (1) above. (Show whole number) c) Instead of using direct labor hours to apply overhead, Superior could have used machine hours. Assume Superior had originally budgeted 14,000 machine hours for the year. Calculate the alternative predetermined rate. Hint: Use formula (1) above. (show 2 decimals) d) During the year, Superior actually incurred 14,500 hours of machine operating time. Calculate the amount of overhead they would had applied to WIP during the year. Hint: Use formula (2) above. e) If Superior had used machine hours to apply overhead, would their overhead have been over- or under-applied? By how much? f) Assuming any over- or under-applied overhead is cleared to COGS, rewrite the journal entry that would have been required to clear the MOH Clearing account (similar to JE i) above). g) Does this situation change the actual amount of overhead costs incurred (JE 1h)? Explain using 10 to 30 words