F05MT1Sol - ACCTG 225 Fall 2005 Solution to Midterm 1 Part...

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ACCTG 225 Hewitt Fall 2005 - 1 - Solution to Midterm 1 Part (i) PREDETERMINED = Estimated Manufacturing Overhead OVERHEAD RATE Estimated Cost Driver = $4,500___ 1,200 units = $3.75 per unit The $4,500 estimated manufacturing overhead balance comprises of the following amounts: Factory maintenance Factory supplies Factory insurance Factory utilities Factory lubrication Indirect labor $600 750 802 888 560 900 Total $4,500 Of the costs in the table presented in the question, sales commissions and advertising (totaling $2,000) are both excluded since they represent period costs and not indirect product costs. Part (ii) APPLIED MAN. = Predetermined overhead rate x Actual cost driver OVERHEAD level = $3.75 per unit x 1,050 units = $3,937.50 Journal entry to record applied manufacturing overhead to WIP: DR Work in process 3,937.50 CR Manufacturing overhead 3,937.50
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Hewitt Fall 2005 - 2 - Part (iii) OVER/UNDERAPPLIED = Applied - Actual OVERHEAD = $3,937.50 - $4,150 = $212.50 underapplied Journal entry to dispose of underapplied manufacturing overhead: DR Cost of goods sold 212.50 CR Manufacturing overhead 212.50 Part (iv) What affect would this entry have on net income for the period? Increase / decrease / no effect $212.50 Part (v) Using the High-Low method, the two mixed costs are: Factory supplies: Cost ($) = 0.2(# units produced) + 510 ; and, Factory lubrication: Cost ($) = 0.08(# units produced) + 464 . Part (vi) The three variable costs are: Factory maintenance: Cost ($) = 0.5(# units produced) ; Factory utilities: Cost ($) = 0.74(# units produced) ; and, Indirect labor: Cost ($) = 0.75 (# units produced) . Part (vii)
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This note was uploaded on 04/07/2008 for the course ACCTG 225 taught by Professor Adams during the Winter '08 term at University of Washington.

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F05MT1Sol - ACCTG 225 Fall 2005 Solution to Midterm 1 Part...

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