Reference no: EM132450531
Problems -
Problem 1 - Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plant wide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company's operations.
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Standard
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Custom
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Direct labor costs
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$55,000
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$106,000
|
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Machine hours
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1,110
|
1,150
|
|
Setup hours
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104
|
380
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Total estimated overhead costs are $302,000. Overhead cost allocated to the machining activity cost pool is $197,000, and $105,000 is allocated to the machine setup activity cost pool.
Required -
(1) Compute the overhead rate using the traditional (plantwide) approach.
(2) Compute the overhead rates using the activity-based costing approach.
(3) Determine the difference in allocation between the two approaches.
Problem 2 - The ledger of American Company has the following work in process account.
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Work in Process-Painting
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5/1
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Balance
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3,890
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5/31
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Transferred out
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?
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|
5/31
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Materials
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6,340
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|
|
|
|
5/31
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Labor
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4,030
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|
|
|
|
5/31
|
Overhead
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1,680
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|
|
|
|
5/31
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Balance
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?
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|
|
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Production records show that there were 510 units in the beginning inventory, 30% complete, 1,650 units started, and 1,580 units transferred out. The beginning work in process had materials cost of $2,840 and conversion costs of $1,050. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.
Required -
1. How many units are in process at May 31?
2. What is the unit materials cost for May?
3. What is the unit conversion cost for May?
4. What is the total cost of units transferred out in May?
5. What is the cost of the May 31 inventory?
Problem 3 - Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $302,096 for the year, and machine usage is estimated at 126,400 hours. For the year, $403,480 of overhead costs are incurred and 132,000 hours are used.
Required -
(1) Compute the manufacturing overhead rate for the year.
(2) What is the amount of under- or over applied overhead at December 31?
(3) Prepare the adjusting entry to assign the under- or over applied overhead for the year to cost of goods sold.