Reference no: EM133132968
Question - Ore Co. makes custom metal landscaping pots. After an order is made and the custom pots are designed, the metal is cut to the design specifications using a large metal laser cutter in the Cutting Department. Then, the cut metal is transferred to the Welding Department where the metal is shaped and welded. The assembled landscaping pot is then transferred to the Finishing Department for polishing and painting. Upon completing in the Finishing Department it is sent to finished goods inventory until sold and shipped. Ore Co. uses a full absorption, normal, weighted average process costing system.
Ore allocates variable and fixed overhead in the Welding Department on the basis of direct labor costs in the Welding Department. As of March 1, 2021, the Welding Department estimated that it would use $50,000 of direct labor during the month; it actually used $60,000 of direct labor. As of March 1, 2021, the Welding Department estimated that it would spend $60,000 on variable overhead and $96,000 on fixed overhead during the month.
For the month ended March 31, 2021, the Cutting Department transferred cut material to make 300 units to the Welding Department during March. The Welding department paid the cutting department costing $150,000 for that cut material.
As of March 1, 2021, the Welding Department had 100 partially completed pots and firepits on hand. The cost of these 100 partially completed pots and fire pits in the Welding Department is:
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Beginning Balance March 1, 2021:
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Costs transferred in from Cutting Department
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$24,000
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Direct Materials
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$4,000
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Direct Labor
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$8,250
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Variable Overhead
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$3,900
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Fixed Overhead
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$6,000
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As of March 31, 2021, the Welding Department had 100 partially welded pots on hand. These 100 partially welded pots are 80% complete with respect to direct materials, 50% complete with respect to direct labor.
Actual cost data for the Welding Department from March 1st to March 31st 2021 are:
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Direct materials cost
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$8,000
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Direct labor cost
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$60,000
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Variable overhead
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$55,000
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Fixed overhead
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$104,000
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Required -
1. What is the normal variable overhead rate in the Welding Department? (Recall that Ore allocates variable overhead in the Welding Department on the basis of direct labor costs in the Welding Department. As of March 1, 2021, the Welding Department estimated that it would use $50,000 of direct labor during the month; it actually used $60,000 of direct labor. As of March 1, 2021, the Welding Department estimated that it would spend $60,000 on variable overhead during the month.)
A: 0.92
B: 1.00
C: 1.20
D: 1.73
2. What is the normal fixed overhead rate in the Welding Department? (Recall that Ore allocates variable overhead in the Welding Department on the basis of direct labor costs in the Welding Department. As of March 1, 2021, the Welding Department estimated that it would use $50,000 of direct labor during the month; it actually used $60,000 of direct labor. As of March 1, 2021, the Welding Department estimated that it would spend $60,000 on variable overhead during the month.)
A: 0.92
B: 1.20
C: 1.73
D: 1.92
3. Using the weighted average method, what is the normal, full absorption cost per equivalent unit for March 2021 for the Welding Department.
4. Assuming that Ore Co. uses the weighted average method, what is the normal, full absorption cost of pots that were completed by the Welding Department during March, 2021?
5. Assuming that Ore Co. uses the weighted average method, what is the normal, full absorption cost of pots in process in the Welding Department at the end of March?
6. What would happen to the cost per equivalent unit for March 2021 for the Welding Department if the overhead was allocated based on the amount of direct material in the Welding Department instead of the direct labor.
A: The cost per equivalent unit would remain the same.
B: The Cost per equivalent unit would increase.
C: The Cost per equivalent unit would decline.
D: I have no idea.
7. What is the actual amount of variable overhead incurred by the Welding Department from March 1st to March 31st 2021? (This is not a trick question).
8. Assuming that Ore Co. uses the weighted average method, what is the ACTUAL, full absorption cost of pots that were completed by the Welding Department during March, 2021?
9. What would happen to the cost of units completed if it was assumed that the units in process were assumed to be 25% complete with respect to labor instead of 50%, but the total cost of labor did not change?
A: The cost per equivalent unit would not change
B: The cost per equivalent unit would increase
C: The cost per equivalent unit would decrease