Spring2008-Exam2

Spring2008-Exam2 - ACCOUNTANCY 321 Spring, 2008 EXAM II I....

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ACCOUNTANCY 321 Spring, 2008 EXAM II I. The Fernandez Company uses a normal job order costing system. It had budgeted the following performance for 2007 at its Engineering Products plant: Machine hours 30,000 Beginning inventories None Sales $4,000,000 Total variable costs 3,000,000 Total fixed costs 800,000 Manufacturing overhead: Variable 360,000 Fixed 600,000 Assume that it's now the end of 2007. A manufacturing overhead rate was used based on one cost pool with machine hours as the cost driver. Total manufacturing overhead incurred in 2007 was $922,400. Overapplied manufacturing overhead was $76,000 for 2007. There was no ending work-in-process inventory. A. In general, why might manufacturing overhead be underapplied or overapplied at Fernandez for any given year? (3 points) B. How many machine hours were used by Fernandez Company in 2007? SHOW DETAILS OF YOUR CALCULATIONS. (4 points) C. Fernandez Company used one overhead cost pool for allocating manufacturing overhead costs. (1) Why is this appropriate (relate this to the Functions of a Costing System)? (3 points) (2) If the manufacturing overhead costs were allocated to another department based on the one overhead cost pool and those costs were included in department profit figures used to evaluate the manager of that department, comment on its appropriateness (relate this to the Functions of a Costing System). (3 points) 1
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II. Hogan, Inc., a farm corporation, produced 15,000 bushels of wheat in its first year of operations. During the year, Hogan, Inc. sold 10,000 bushels of the grain produced for $2.40 per bushel. They collected three-fourths of the amount due; the balance is to be collected by June 30 of next year. The local grain elevator is quoting a year-end price for wheat of $3.00 per bushel. Additional data for the first year follows: Depreciation on the tractor and combine $ 3,000 Other production costs (cash) – per bushel .50 Miscellaneous administrative costs (cash)
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Spring2008-Exam2 - ACCOUNTANCY 321 Spring, 2008 EXAM II I....

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