Question
XYZ company ran 1,500 machine hours at the end of the year. The pre-determined overhead rate was calculated at the beginning of the year to
XYZ company ran 1,500 machine hours at the end of the year. The pre-determined overhead rate was calculated at the beginning of the year to be $250 per machine hour and actual overhead was $400,000, by how much was overhead over-or-under applied?
A.Under applied by $15,000
B.Under applied by $25,000
C.Over applied by $25,000
D.Over applied by $15,000
At the end of the period, if overhead has been overapplied by a small amount, how is it adjusted?
A.Increase COGS
B.Increase COGS, WIP & Finished Goods Inventory by a pro-rata amount
C.Decrease COGS, WIP & Finished Goods Inventory by a pro-rata amount
D.Decrease COGS
Mambo Company is considering a new machine for its production plant to replace an old machine that originally cost $14,000 and has $11,000 of accumulated depreciation. The new machine can be purchased at a cash cost of $20,000, but the distributor of the new machine has offered to take the old machine in as a trade-in, thereby reducing the cost of the new machine to $18,000. Based only on this information, calculate the total relevant cost of acquiring the new machine.
A.$19,000, or the gross cost of the new machine minus the $1,000 loss on disposing of the old machine.
B.$18,000, or the net cash paid to the distributor
C.$21,000, or the net cash paid plus the book value ($3,000) of the old machine
D.$20,000, or the gross cost of the new machine
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