Ch03 Solutions Werner Jones Management Accounting 3e

Ch03 Solutions Werner Jones Management Accounting 3e - 3...

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Unformatted text preview: 3 Determining Costs of Products SOLUTIONS TO APPLY WHAT YOU HAVE LEARNED 3-5. 1. J Commercial jetliners 2. P Hair spray 3. J Oil tankers 4. P Breakfast cereal 5. J Office buildings 6. P Aspirin 7. P Dog food 8. J Advertising posters 9. J Custom kitchen cabinets 10. P Gasoline 3-6. a. Managers would need to determine the cost of the manufacturing overhead associated with each swing set at the time of production so that the cost of each set is known for cost control and pricing purposes. They cannot wait until actual overhead costs are known and recorded. b. Actual overhead costs applicable to the first few swing sets produced would not be available at the time of production because these costs are indirect (they cannot be economically traced or identified to specific units produced). c. In the absence of actual overhead information, the overhead costs expected or budgeted for the year are allocated to the units produced. Chapter 3 – Determining Costs of Products 49 3-6. (Continued) d. Overhead application rates: (1) $240,000/30,000 hours = $8 per direct labor hour (2) $240,000/$384,000 = $0.625 per direct labor dollar (62.5%) (3) $240,000/12,500 hours = $19.20 per machine hour e. Direct labor cost might well be the best allocation base, particularly if the mix of skills and hourly labor costs is not the same for each type of swing set. If there is not a significant difference in the mix, any of the three bases could reasonably be used. 3-7. a. OH Application Rate = Estimated Manufacturing OH Estimated Direct Labor Hours $19.20 /direct labor hour = $403,200 21,000 b. Allocated OH = Actual Direct Labor Hours x OH Rate $380,000 = 20,000 x $19.00 Chapter 3 – Determining Costs of Products 50 3-8. Griswald Company General Journal Page 49 Date Description Post Ref. Debit Credit (1) Manufacturing Overhead Incurred 378,000 Various Accounts 378,000 To record the actual manufacturing overhead. (2) Work-in-Process Inventory 380,000 Manufacturing Overhead Allocated 380,000 To allocate overhead to work- in-process. (3) Manufacturing Overhead Allocated 380,000 Manufacturing Overhead Incurred 378,000 Cost of Goods Sold 2,000 To close the over-applied overhead to cost of goods sold. 3-9. a. OH Application Rate = Estimated Manufacturing OH Estimated Direct Labor Hours $16.00 / machine hour = $2,000,000 125,000 b. Allocated OH = Actual Direct Labor Hours x OH Rate $2,520,000 = 140,000 x $18.00 Chapter 3 – Determining Costs of Products 51 3-10. Anderson Company General Journal Page 91 Date Description Post Ref. Debit Credit (1) Manufacturing Overhead Incurred 2,100,000 Various Accounts 2,100,000 To record the actual manufacturing overhead. (2) Work-in-Process Inventory 2,520,000 Manufacturing Overhead Allocated 2,520,000 To allocate overhead to work- in-process....
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This note was uploaded on 01/19/2012 for the course ACC 212 taught by Professor Quintanna during the Spring '08 term at University of Miami.

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Ch03 Solutions Werner Jones Management Accounting 3e - 3...

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