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UCD Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply overhead
UCD Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply overhead to individual jobs. An estimate of overhead costs at different volumes was prepared for the current year as follows: |
Direct labor-hours | 15,000 | 20,000 | 25,000 | ||||
Variable overhead costs | $ | 360,000 | $ | 480,000 | $ | 600,000 | |
Fixed overhead costs | 500,000 | 500,000 | 500,000 | ||||
Total overhead | $ | 860,000 | $ | 980,000 | $ | 1,100,000 | |
The expected volume is 20,000 direct labor-hours for the entire year. The following information is for October, when jobs 1011 and 1015 were completed. |
Inventories, October 1 | |
Raw materials and supplies | $ 42,000 |
Work in process (Job 1011) | 91,300 |
Finished goods | 227,900 |
Purchases of raw materials and supplies | |
Raw materials | 629,000 |
Supplies | 79,300 |
Materials and supplies requisitioned for production | |
Job 1011 | 281,000 |
Job 1015 | 234,500 |
Job 1017 | 47,200 |
Supplies | 76,700 |
$639,400 | |
Machine-hours (MH) | |
Job 1011 | 6,200 MH |
Job 1015 | 6,100 MH |
Job 1017 | 3,700 MH |
Direct labor-hours (DLH) | |
Job 1011 | 7,000 DLH |
Job 1015 | 3,050 DLH |
Job 1017 | 1,850 DLH |
Labor costs | |
Direct labor wages (all hours @ $24) | $285,600 |
Indirect labor wages (12,000 hours) | 63,000 |
Supervisory salaries | 128,000 |
Building occupancy costs (heat, light, depreciation, etc.) | |
Factory facilities | 36,900 |
Sales and administrative offices | 14,200 |
Factory equipment costs | |
Power | 21,800 |
Repairs and maintenance | 8,200 |
Other | 9,900 |
$ 39,900 | |
(Note: Regardless of your answer to requirement [a], assume that the predetermined overhead rate is $50 per direct labor-hour. Use this amount in answering requirements [b] through [e].) |
Required: |
(a) | Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. |
(b) | Compute the total cost of Job 1011 when it is finished. |
(c) | How much of factory overhead cost was applied to Job 1017 during October? |
(d) | What total amount of overhead was applied to jobs during October? |
(e) | Compute actual factory overhead incurred during October. |
(f) | At the end of the year, UCD Company had the following account balances: (Leave no cells blank - be certain to enter "0" wherever required.) |
Balance | |
Underapplied Overhead | $ 3,000,000 |
Cost of Goods Sold | 28,000,000 |
Work-in-Process Inventory | 4,000,000 |
Finished Goods Inventory | 8,000,000 |
Show the Underapplied Overhead effect on the account balances in the following table. |
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