Assessment 2 Part 3: Analysis of Overhead Using a Predetermined Rate Scenario: Atchison Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows: 180,000 210,000 Direct labor-hours Variable overhead costs Fixed overhead costs 1 Total overhead 2 150,000 $1,155,000.00 712 800 $1,867,800.00 $1,386,000.00 712 800 $2,098,800.00 $1,617,000.00 712,800 $2,329,800.00 The expected volume is 180,000 direct labor-hours for the entire year. The following information is for September, when Jobs 6023 and 6024 were completed: 5 Inventories, September 1 6. Materials and supplies $ 31,500 7. Work in process (Job 6023) $162,000 8 Finished goods $337,500 19 Purchases of materials and supplies 20 Materials $445,500 21. Supplies $ 49,500 Materials and supplies requisitioned for production 22 23 Job 6023 $ 148,500 24 Job 6024 123.750 25 Job 6025 84,150 26. Supplies 19,800 $376,200 27 28 Factory direct labor-hours (DLH) 10.500 DLH 29 Job 6023 9,000 DLH 30 Job 6024 6.000 DLH 31 Job 6025 32 Labor costs Direct labor wages (all hours @ $9) $229,500 34 Indirect labor wages (12,000 hours) 51,000 35 Supervisory salaries 118,800 36 Building occupancy costs (heat, light, depreciation, etc.) 37 Factory facilities $21,450 38 Sales and administrative offices 8,250 Factory equipment costs 39 40 Power 13,200 41 Repairs and maintenance 4,950 42 Other 8,250 43 $26,400 44 35 REQUIRED 36 Answer the following questions: 37 Answers 1. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Note: Regardless of your answer to requirement (1), assume that the predetermined overhead rate is $10 per direct labor-hour. Use this amount in answering requirements (2) through [5].) 48 09 2. Compute the total cost of Job 6023 when it is finished. 3. How much of factory overhead cost was applied to Job 6025 51 during September? 4. What total amount of overhead was applied to jobs during 52 September? 5. Compute actual factory overhead incurred during September 50 53 6. At the end of the year, Atchison Company had the following account balances: Overapplied Overhead Cost of Goods Sold Work-in-Process Inventory Finished Goods Inventory $ 3,300 3,234,000 125,400 270,600 How would you recommend treating the over applied overhead, assuming that it is not material? Show the new account balances in the following table: 3 # Overapplied Overhead 5 Cost of Goods Sold 5 Work-in-Process Inventory 7 Finished Goods Inventory B 9
