Solution to topic 2 tutorial

# Solution to topic 2 tutorial - SOLUT IO N TO TOP IC 2 T U...

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SOLUTION TO TOPIC 2 TUTORIAL TOPIC: Job Order Costing 3-5 Although manufacturing-overhead costs are not directly traceable to products, manufacturing operations cannot take place without incurring overhead costs. Consequently, overhead costs are applied to products for the purpose of making pricing decisions, in order to ensure that product prices cover all of the costs of production. 3-10 When a single volume-based cost driver is used to apply manufacturing overhead, the managerial accountant's primary objective is to select a cost driver that varies in a pattern similar to the pattern in which manufacturing overhead varies. Moreover, if a single cost driver is used, it should be some productive input that is common to all of the firm's products. 3-19 Overapplied or underapplied overhead is caused by errors in estimating the predetermined overhead rate. These errors can occur in the numerator (budgeted manufacturing overhead), or in the denominator (budgeted level of the cost driver). 3-24 1 . Raw-material inventory, January 1 ................................. \$174,20 0 Add: Raw-material purchases ........................................ 248,300 Raw material available for use ...................................... \$422,50 0 Deduct: Raw-material inventory, January 31 .................. 161,200 Raw material used in January ........................................ \$261,30 0 Direct labor .................................................................. 390,000 Total prime costs incurred in January ............................. \$651,30 0

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2 . Total prime cost incurred in January .............................. \$651,30 0 Applied manufacturing overhead (70% × \$390,000) .......
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