Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribed

image text in transcribed

image text in transcribedimage text in transcribed

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: Direct Labour Hours of Operation Manufacturing Overhead January $20,000 980 $197,600 February 19,000 1.000 125,700 March 25,000 1,180 221,600 April 27,000 1,170 152,100 May 22,000 1,055 127.100 June 20,000 1,030 117,500 Ryan then asked CFO Jordan Leigh for information available to determine the cost of goods manufactured. Ryan was provided with the following information. 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 $30,000; Work in process inventory $69,000. 2. Raw material purchases for the month were $180,000. 3. Of the raw materials used in production, 75% could be traced to the actual production, and the rest was indirect materials. 4. Ending raw materials inventory was $42,000. 5. Actual costs for wages and salaries were $80,000, of which 50% was considered overhead; the balance was direct labour. 6. Hours of operation for the month were 560. 7. Total manufacturing costs for the month were $310,000. 8. Costs transferred into finished goods inventory for the month were $320,000. 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, e.g. 2.75 wherever necessary.) Cost Formula Based on direct labour $ X Based on hours of operation $ + $ X 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 operation $ Actual $ Determine which activity base would be better for predicting manufacturing overhead. would be better choice as an activity base for predicting manufacturing overhead. Prepare a condensed cost of goods manufactured schedule. Waterways Corporation Schedule of Cost of Goods Manufactured $ o 11 > > > (> . : (>

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Frank Woods Business Accounting Volume 2

Authors: Frank Wood, Alan Sangster

14th Edition

1292209178, 9781292209173

More Books

Students also viewed these Accounting questions

Question

Note in Eq. (7.11) that the bending force is a function of t2. Why?

Answered: 1 week ago

Question

How does Disney try to redress prejudice and discrimination?

Answered: 1 week ago