Month overhead cost of labor hours page 4 of 12

Month Overhead Cost # of labor hours
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January $ 9,640 490
February $ 12,680 680
March $ 11,080 580
April $ 11,720 620
May $ 13,000 700
June $ 10,120 520
July $ 8,840 440
August $ 6,600 300
Required: Using the high-low method:
A) Calculate the fixed cost of overhead.
B) Calculate the variable rate per labor hour.
C) Construct the cost formula for total overhead cost.
3. D) The company is estimating that in September the labor hours will be 600. How
much should they estimate to have in total overhead cost for September?
4. Total cost = $11,400
3. Aaron Company provided the following data for next month:
Selling price per unit $400
Total Variable costs $288,000
Total fixed costs per unit $216,000
Expected (planned) production and sales 1,800 units
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Required: What is contribution margin per unit? What is the break-even point in
units?
ANS
Variable cost per unit = $288000/1800 = $160.
Contribution margin per unit = 400 – 160 = $240.
Break-even points in units = $216,000/$240 per unit = 900 units
4. The packaging department had the following data for the month of June:
Units in BWIP 0
Units completed 8,000
Units in EWIP (25% complete) 1,200
Total manufacturing costs 14,525
Required:
A. What is the output in equivalent units for June?
B. What is the unit manufacturing cost for June?
C. Calculate the cost of goods transferred out for June.
D. Calculate the value of June's EWIP
ANS:
A.
Units completed 8,000
1,200 units x 25% complete 300
June output 8,300
B.
Unit cost = $14,525/8,300 = $1.75
C.
Cost transferred out = $1.75 x 8,000 = $14,000
D.
EWIP = $1.75 x 300 = $525
5. Pribil Farm Equipment is a job-order costing manufacturer that uses a
plantwide overhead rate based on direct labor hours. Estimations for the year
include $336,000 in overhead and 28,000 direct labor hours. Pribil worked on
five jobs in June. Data are as follows:
Job 89 Job 90 Job 91 Job 92 Job 93
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Balance, 6/1 $23,110 $18,240 $ 9,510 $ 0 $ 0
Direct materials 13,000 17,210 22,900 15,240 8,210
Direct labor cost $8,075 $11,500 $16,250 $9,750 $4,860
Direct labor hours 1,615 2,300 3,250 1,950 972
By June 30, Jobs 89 and 91 were completed and sold. The rest of the jobs remained in
process.
A. Calculate the plantwide overhead rate.
B. Prepare a job-order cost sheet.
C. Calculate the Work in Process on June 30.
D. Calculate the cost of goods sold for June.
ANS:
A. $336,000/28,000 = $12 per direct labor hour
B. Job-order Cost sheet
Job 89 Job 90 Job 91 Job 92 Job 93
Balance, 6/1 $23,110 $18,240 $ 9,510 $ 0 $ 0
Direct materials $13,000 $17,210 $22,900 $15,240 $8,210
Direct labor cost $8,075 $11,500 $16,250 $9,750 $4,860
Applied overhead $19,380 $27,600 $39,000 $23,400 $11,664
Balance 6/30 $63,565 $74,550 $87,660 $48,390 $24,734
C. $74,550 + $48,390 + $24,734 = $147,674
Job 90 Job 92 Job 93
Balance, 3/1 $18,240 $0 $0
Direct materials 17,210 15,240 8,210
Direct labor cost 11,500 9,750 4,860
Overhead 27,600 23,400 11,664
Total $74,550 $48,390 $24,734
D. Job 89: $23,110 + $13,000 + $8,075 + $19,380 = $63,565
Job 91: $9,510 + $22,900 + $16,250 + $39,000 = $87,660
6. Round Rock Company manufactures a product in a factory that has two
producing departments, Cutting and Stitching, and two support
departments, S1 and S2. The activity driver for S1 is number of employees,
and the activity driver for S2 is number of machine hours. The following
data pertain to Round Rock:
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Support Departments Producing Departments
S1 S2 Cutting Stitching
Direct costs $210,000 $165,000 $125,000 $75,500
Normal activity:
Number of employees - 50 75 175
Machine hours 700 - 11,250 3,750
Required:
A. Calculate the cost assignment ratios to be used under the direct method for