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Practice Problems 2

# Practice Problems 2 - Chapter 4 Assignments 1 ATT Company...

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Chapter 4 Assignments: 1. ATT Company uses a job order costing system to account for its production. During the month of January, the following events occurred: Required: (1) Journalize the entries; (2) Show posted T accounts for all inventories; (3) Calculate and discuss if overhead was over or under applied. a. Materials were purchased on account for \$35,480. b. Materials totaling \$33,650 were requisitioned for use in production. c. Direct labor payroll was \$15,750 for January. d. Actual overhead of \$41,260 was incurred and paid. e. Factory overhead was charged to production at the rate of 280% of direct labor. f. Completed units costing \$85,450 were transferred to finished goods. g. Units costing \$77,825 were sold on account for \$101,175. a. Materials Control 35,48 0 Accounts Payable Control 35,48 0 b. Work in Process Control 33,65 0 Materials Control 33,65 0 c. Work in Process Control 15,75 0 Wages Payable Control 15,75 0 d. Manufacturing Overhead Control 41,26 0 Miscellaneous Accounts 41,26 0 e. Work in Process Control 44,10 0 Manufacturing Overhead Allocated 44,10 0 (280% * 15,750) f. Finished Goods Control 85,45 0 Work in Process Control 85,45 0 g. Cost of Goods Sold 77,82 5

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Finished Goods Control 77,82 5 Accounts Receivable 101,17 5 Sales 101,17 5 Material Control Mfg OH Allocated 35480 44100 33650 1830 44100 Work in Process Control Finished Goods Control 33650 85450 15750 77825 44100 85450 8050 7625 Mfg OH Control 41260 Actual = 41,260 Applied = 44,100 Over- applied \$2,840 41260 2. A local accounting firm employs 20 full time professionals. The budgeted annual compensation per employee is \$40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct cost category and are allocated to jobs on a per hour basis. Other costs are included in a single indirect cost pool, allocated according to professional labor hours. Budgeted indirect costs for the year are \$787,500, and the firm expects to have 90 clients during the coming year. Required: (1) Calculate the budgeted direct labor cost rate per hour. Total direct labor cost: \$40,500 * 20 = \$810,000 Total hours: 500 * 90 = 45,000 hours Direct labor cost rate per hour: \$810,000 / 45,000 = \$18 per hour
(2) Calculate the budgeted indirect cost rate per hour. Indirect cost rate per hour: \$787,500 / 500 * 90 = \$17.50 per hour (3) If ten clients are lost and the workforce stays at 20 employees, then what will the direct labor cost range change to? Total direct cost = \$40,500 * 20 = \$810,000 Total hours = 500 * 80 = 40,000 hours Direct cost rate per hour: \$810,000 / 40,000 = \$20.25 per hour The direct labor cost rate per hour increased from \$18.00 per hour to \$20.25 per hour. 3.

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Practice Problems 2 - Chapter 4 Assignments 1 ATT Company...

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