Question
Roman Sculpture Co. manufactures custom-designed garden accents and distributes their product internationally. The company used prior year data to forecast expected costs and expenses. They
Roman Sculpture Co. manufactures custom-designed garden accents and distributes their product internationally. The company used prior year data to forecast expected costs and expenses. They anticipated 52,560 machine hours and estimated direct labour cost of $964,000. At the end of the year, Roman Sculpture Co. had actually used 51,000 machine hours. The costs incurred were:
Manufacturing plant and equipment depreciation: $408,000
Plant property taxes: $22,000
Direct labour: $889,000
Materials (10% indirect): $400,000
Salaries & Wages (Sales salaries: $9,000, Plant Maintenance staff wages: $18,500)
New plant signage for COVID-19 restrictions: $9,000
Training for all administrative staff: $3,000
The predetermined manufacturing overhead rate to allocate overhead to individual jobs is based on the machine hours required. At the beginning of the year, the company expected to incur a manufacturing overhead cost of $550,000.
1. Compute Roman Sculpture Co.s predetermined manufacturing overhead rate. (2 marks)
2. Is manufacturing overhead underallocated or overallocated at the end of the year (be sure to specify howmuch and show all of your work on how you arrived to the conclusion)? (4 marks)
3. Interpret the result from item 2. Comment on the accuracy of the predetermined manufacturing overhead and if/what management should do to improve. (2 marks)
4. Comment and explain the following observation in your own words (4 marks):
A. Job-costing systems tend to produce more accurate product costs information compared to process costing systems. On the other hand, they also tend to be more costly systems than processing costing systems.
B. A change in Roman Sculptures business model would need to occur for a different costing approach to be used.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started