Question 1 (Marks 20) The Grand River Company uses a budgeted overhead rate for applying factory overhead to job orders on a machine hour basis for the Machining Department and on a direct labour hour basis for the Finishing Department The company estimated the following for 2010 Departments Machining Finishing Factory overhead $ 10,000,000 $ 8,000,000 Machine hours 200,000 33,000 Direct labour hours 30,000 160,000 Direct labour cost $ 900,000 $ 4,000,000 Required Calculate the overhead rates to be used in two departments ( Marks 2) Machining department Manufacturing Overhead Machine Hours 10000000 200000 $50(per hour) Finishing department Manufacturing Overhead Labour cost 8000000 4000000 200 of direct labour cost During the month of January the cost recorded for job order 400 shows the following Departments Machining Finishing Direct materials requisitioned $14,000 $ 3,000 Direct labour cost $ 600 $ 1250 Direct labour hours 30 50 Machine hours 130 10 Calculate the overhead applied to Job 400 (Marks 2) Machining Department Overhead, 50 130 $6500 Finishing Department Overhead, 1250 2 2500 Total manufacturing Overhead $9000 Assuming that job 400 consists of 200 units of product, what is the unit cost of job 400 (Marks 4) Machining Finishing Direct Materials $14000 $3000 Direct Labor 600 1250 Overhead Allocated 6500 2500 Total $21100 $6750 Total Costs 21100 6750 $27850 Cost Per Unit 27850 200 $139 25(per unit) The actual amount at the end of 2010 for all jobs are as follows Departments Machining Finishing Factory overhead $ 11,200,000 $ 7,900,000 Direct labour cost $ 950,000 $ 4,100,000 Machine hours 220,000 32,000 Calculate the under over applied overhead for each department ( indicate whether under or over) (Marks 4) Machining Department Overhead Allocated ( Prepare the journal entries for the Machining Department and Finishing Department, assuming that the under over applied is closed to COGS ( Marks 4) Prepare the journal entry for the Finishing Department, assuming the under over applied is allocated between the appropriate accounts based on the overhead applied component of each ending balance The factory overhead applied component of WIP, FG and COGS is as follows WIP $ 1,000,000 FG $ 1,600,000 COGS $ 5,400,000 respectively

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Question # 1: (Marks -20) The Grand River Company uses a budgeted overhead rate for applying factory overhead to job orders on a machine hour

Question # 1: (Marks -20)

The Grand River Company uses a budgeted overhead rate for applying factory overhead to job orders on a machine hour basis for the Machining Department and on a direct labour hour basis for the Finishing Department. The company estimated the following for 2010:

Departments	Machining	Finishing
Factory overhead	$ 10,000,000	$ 8,000,000
Machine hours	200,000	33,000
Direct labour hours	30,000	160,000
Direct labour cost	$ 900,000	$ 4,000,000

Required:

Calculate the overhead rates to be used in two departments. ( Marks -2)

Machining department: Manufacturing Overhead / Machine Hours

=10000000/200000

= $50(per hour)

Finishing department: Manufacturing Overhead/ Labour cost

=8000000/4000000=200% of direct labour cost

During the month of January the cost recorded for job order # 400 shows the following:

Departments	Machining	Finishing
Direct materials requisitioned	$14,000	$ 3,000
Direct labour cost	$ 600	$ 1250
Direct labour hours	30	50
Machine hours	130	10

Calculate the overhead applied to Job # 400. (Marks 2)

Machining Department Overhead, 50*130= $6500

Finishing Department Overhead, 1250*2= 2500

Total manufacturing Overhead: $9000

Assuming that job # 400 consists of 200 units of product, what is the unit cost of job # 400?

(Marks-4)

Machining Finishing

Direct Materials $14000 $3000

Direct Labor 600 1250

Overhead Allocated 6500 2500

Total $21100 $6750

Total Costs:21100+6750= $27850

Cost Per Unit:27850/200= $139.25(per unit)

The actual amount at the end of 2010 for all jobs are as follows :

Departments	Machining	Finishing
Factory overhead	$ 11,200,000	$ 7,900,000
Direct labour cost	$ 950,000	$ 4,100,000
Machine hours	220,000	32,000

Calculate the under/ over applied overhead for each department (indicate whether under or over). (Marks-4)

Machining Department Overhead Allocated (

Prepare the journal entries for the Machining Department and Finishing Department, assuming that the under/over applied is closed to COGS. ( Marks-4)

Prepare the journal entry for the Finishing Department, assuming the under/over applied is allocated between the appropriate accounts based on the overhead applied component of each ending balance. The factory overhead applied component of WIP, FG and COGS is as follows:

WIP: $ 1,000,000; FG: $ 1,600,000; COGS: $ 5,400,000 respectively.