Recently Ryan Smith, the plant manager of the manufacturing division of Waterways Corporation, has been focusing on changes to overhead costs. He realizes that Ben Clark's new designs call for more automation in the plant, but he is also investigating if there are any opportunities for cost savings. Ryan thought it might be helpful to his cost-cutting measures if he could predict what manufacturing overhead would be in the following months. But first he needed to determine the appropriate activity base. He thought there could be two possibilities: direct labour or the number of hours of operation. From historical data, he retrieved the following information: 800 January February March April May June Direct Hours of Manufacturing Labour Operation Overhead $29.000 780 $196,200 28,000 157,600 34,000 980 224,200 36,000 970 183,200 31.000 855 158.700 830 149.300 29.000 Ryan then asked CFO Jordan Leigh for information available to determine the cost of goods manufactured. Ryan was provided with the following information 1. The balances in the applicable inventory accounts at the beginning of the month were: Raw materials inventory $34,000; Work in process inventory $58.000. 2. Raw material purchases for the month were $194,000. 452 PM o e 2. Homework Assignment X + es/35987/assignments/3776682 Ryan then asked CFO Jordan Leigh for information available to determine the cost of goods manufactured. Ryan was provided with the following information. 1. The balances in the applicable inventory accounts at the beginning of the month were: Raw materials inventory $34,000; Work in process inventory $58,000. 2. Raw material purchases for the month were $194,000. 3. Of the raw materials used in production, 70% could be traced to the actual production, and the rest was indirect materials. 4. Ending raw materials inventory was $60,000. 5. Actual costs for wages and salaries were $74.000, of which 60% was considered overhead; the balance was direct labour. 6. Hours of operation for the month were 500. 7. Total manufacturing costs for the month were $330.000, 8. Costs transferred into finished goods inventory for the month were $360,000 Homework Assignment X s/35987/assignments/3776682 * P Using the high-low method, and based on the historical data provided, determine two possible cost formulas for manufacturing overhead. (Round answers to 2 decimal places, eg. 2.75 wherever necessary) Cost Formula Based on direct labour Based on hours of operation $ e Textbook and Media Using the cost formulas developed in the previous part, determine the manufacturing overhead and actual manufacturing overhead for the month. Manufacturing overhead Based on direct labour Based on hours of operations Actual Determine which activity base would be better for predicting manufacturing overhead. would be better choice as an activity base for predicting manufacturing overhead. e Texthook and Media Waterways Corporation Schedule of Cost of Goods Manufactured o @ 6400 IN 45 PM Recently Ryan Smith, the plant manager of the manufacturing division of Waterways Corporation, has been focusing on changes to overhead costs. He realizes that Ben Clark's new designs call for more automation in the plant, but he is also investigating if there are any opportunities for cost savings. Ryan thought it might be helpful to his cost-cutting measures if he could predict what manufacturing overhead would be in the following months. But first he needed to determine the appropriate activity base. He thought there could be two possibilities: direct labour or the number of hours of operation. From historical data, he retrieved the following information: 800 January February March April May June Direct Hours of Manufacturing Labour Operation Overhead $29.000 780 $196,200 28,000 157,600 34,000 980 224,200 36,000 970 183,200 31.000 855 158.700 830 149.300 29.000 Ryan then asked CFO Jordan Leigh for information available to determine the cost of goods manufactured. Ryan was provided with the following information 1. The balances in the applicable inventory accounts at the beginning of the month were: Raw materials inventory $34,000; Work in process inventory $58.000. 2. Raw material purchases for the month were $194,000. 452 PM o e 2. Homework Assignment X + es/35987/assignments/3776682 Ryan then asked CFO Jordan Leigh for information available to determine the cost of goods manufactured. Ryan was provided with the following information. 1. The balances in the applicable inventory accounts at the beginning of the month were: Raw materials inventory $34,000; Work in process inventory $58,000. 2. Raw material purchases for the month were $194,000. 3. Of the raw materials used in production, 70% could be traced to the actual production, and the rest was indirect materials. 4. Ending raw materials inventory was $60,000. 5. Actual costs for wages and salaries were $74.000, of which 60% was considered overhead; the balance was direct labour. 6. Hours of operation for the month were 500. 7. Total manufacturing costs for the month were $330.000, 8. Costs transferred into finished goods inventory for the month were $360,000 Homework Assignment X s/35987/assignments/3776682 * P Using the high-low method, and based on the historical data provided, determine two possible cost formulas for manufacturing overhead. (Round answers to 2 decimal places, eg. 2.75 wherever necessary) Cost Formula Based on direct labour Based on hours of operation $ e Textbook and Media Using the cost formulas developed in the previous part, determine the manufacturing overhead and actual manufacturing overhead for the month. Manufacturing overhead Based on direct labour Based on hours of operations Actual Determine which activity base would be better for predicting manufacturing overhead. would be better choice as an activity base for predicting manufacturing overhead. e Texthook and Media Waterways Corporation Schedule of Cost of Goods Manufactured o @ 6400 IN 45 PM