Problem 7-52 Cost Flows through Accounts (LO 7-2, 3, 4) Brighton Services repairs locomotive engines. It employs 100 full-time workers at $20 per hour. Despite operating at capacity, last years performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs: Direct materials Direct labor Manufacturing overhead $1,035,400 4,000,000 1,040,000 Of the $1,040,000 manufacturing overhead, 30 percent was variable overhead and 70 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 Direct Direct Labor Job 101 102 103 Total manufacturing overhead Total marketing and administrative costs $137,200 $490,000 93,000 312.400 94,000 197,600 271,200 112,000 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 Variable S 29,900 27,500 4,600 S 62,000 Overhead Fixed $104.000 88.200 17.000 $209,200 101 102 103 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 $850,000 and $550,000, respectively. A 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 Materials Inventory Wages Payable Beg. bal Beg. bal 93,000 312,400 94,000 197,600 End. bal 187,000 End. bal 510,000 Variable Manufacturing O Fixed Manufacturing Overhead 29,900 27,500 4,600 104,000 88.200 17,000 End. bal. 62,000 End. bal 209,200 Work-i s Inventory Finished Goods Inventory Beg. bal. Beg. bal Cost of goods sold End. bal End. bal. Cost of Goods sold Beg. bal Finished Goods End. bal. b. Using last years overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead. (Round your answers to 2 decimal places. Use the rounded values in the subsequent requirements.) Predetermined Overhead Rate (per Direct Variable Overhead Rate Fixed Overhead Rate 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) Materials Inventory Wages Payable Beg. bal. Beg. bal End. bal. Variable Manufacturing Overhead Fixed Manufacturing Overhead End. bal. Finished Goods Inventory Beg. bal Beg. bal Cost of goods sold Cost of Goods sold Under-or Over-Applied Overhead Beg. bal. Finished Goods Beg. bal. End. bal. End. bal. d. Calculate operating profit (loss) for the first quarter of this year under actual and normal costing systems. Actual Normal Problem 7-52 Cost Flows through Accounts (LO 7-2, 3, 4) Brighton Services repairs locomotive engines. It employs 100 full-time workers at $20 per hour. Despite operating at capacity, last years performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs: Direct materials Direct labor Manufacturing overhead $1,035,400 4,000,000 1,040,000 Of the $1,040,000 manufacturing overhead, 30 percent was variable overhead and 70 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 Direct Direct Labor Job 101 102 103 Total manufacturing overhead Total marketing and administrative costs $137,200 $490,000 93,000 312.400 94,000 197,600 271,200 112,000 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 Variable S 29,900 27,500 4,600 S 62,000 Overhead Fixed $104.000 88.200 17.000 $209,200 101 102 103 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 $850,000 and $550,000, respectively. A 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 Materials Inventory Wages Payable Beg. bal Beg. bal 93,000 312,400 94,000 197,600 End. bal 187,000 End. bal 510,000 Variable Manufacturing O Fixed Manufacturing Overhead 29,900 27,500 4,600 104,000 88.200 17,000 End. bal. 62,000 End. bal 209,200 Work-i s Inventory Finished Goods Inventory Beg. bal. Beg. bal Cost of goods sold End. bal End. bal. Cost of Goods sold Beg. bal Finished Goods End. bal. b. Using last years overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead. (Round your answers to 2 decimal places. Use the rounded values in the subsequent requirements.) Predetermined Overhead Rate (per Direct Variable Overhead Rate Fixed Overhead Rate 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) Materials Inventory Wages Payable Beg. bal. Beg. bal End. bal. Variable Manufacturing Overhead Fixed Manufacturing Overhead End. bal. Finished Goods Inventory Beg. bal Beg. bal Cost of goods sold Cost of Goods sold Under-or Over-Applied Overhead Beg. bal. Finished Goods Beg. bal. End. bal. End. bal. d. Calculate operating profit (loss) for the first quarter of this year under actual and normal costing systems. Actual Normal