AC 202

AC 202 - STUDY GUIDE 1.Paulson Company uses a predetermined...

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Unformatted text preview: STUDY GUIDE 1.Paulson Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year: Direct materials...................................... $25,000 Direct labor ............................................ 22,000 Advertising expense............................... 15,000 Rent on factory building ........................ 13,500 Depreciation on factory equipment........ 6,500 Indirect materials.................................... 10,000 Sales salaries .......................................... 28,000 Insurance on factory equipment............. 12,000 Paulson estimated that 40,000 direct labor hours and 20,000 machine hours would be worked during the year. The predetermined overhead rate per machine hour will be: A) $1.60. B) $2.10. C) $1.00. D) $1.05. Answer: B) $2.10. Manufacturing OH = Rent + Depreciation + Indirect materials + Insurance = 13,500 + 6,500 + 10,000 + 12,000 = 42,000 Machine hrs= 20,000 Therefore POHR = 42,000 / 20,000 = $2.10 2. Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves? A) machine-hours B) power consumption C) direct labor-hours D) machine setups Answer: C) direct labor-hours 3. Nil Co. uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. For the year ended December 31, Nil's estimated manufacturing overhead was $600,000, based on an estimated volume of 50,000 direct labor hours, at a direct labor rate of $6.00 per hour. Actual manufacturing overhead amounted to $620,000, with actual direct labor cost of $325,000. For the year, manufacturing overhead was: A) overapplied by $20,000. B) underapplied by $22,000. C) overapplied by $30,000. D) underapplied by $30,000. Answer: C) overapplied by $30,000. Direct labor cost = 50,000 x $ 6 = $300,000 manufacturing overhead = $600,000 Rate = $600,000/ $300,000 = $ 2 Actual direct labor cost = $325,000 Therefore applied overhead= 325,000 x 2 =$650,000 Actual manufacturing OH=$620,000 Page 1 STUDY GUIDE Therefore OH over applied==$650,000 - $620,000 = $30,000 Use the following to answer question 4: Leija Manufacturing Company uses a job-order costing system and started the month of March with one job in process (Job #359). This job had $500 of cost assigned to it at this time. During March, Leija assigned production costs as follows to the jobs worked on during the month: Job #359 Job #360 Job #361 Total cost assigned to jobs during March $6,000 $8,100 $2,400 During March, Leija completed and sold Job #359. Job #360 was also completed but was not sold by month end. Job #361 was not completed by the end of March....
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AC 202 - STUDY GUIDE 1.Paulson Company uses a predetermined...

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