Overhead costs are expected to total 900000 for the

Info icon This preview shows pages 32–35. Sign up to view the full content.

View Full Document Right Arrow Icon
Overhead costs are expected to total $900,000 for the year, and machine usage is estimated at 200,000 hours. In January, $93,000 of overhead costs are incurred and 22,000 machine hours are used. For the remainder of the year, $974,000 of additional overhead costs are incurred and 214,000 additional machine hours are worked. Instructions (a) Compute the manufacturing overhead rate for the year. (b) What is the amount of over- or underapplied overhead at January 31? How should this amount be reported in the financial statements prepared on January 31? (c) What is the amount of over- or underapplied overhead at December 31? Solution 126 (11–14 min.) (a) $4.50 per machine hour ($900,000 ÷ 200,000) (b) Incurred $93,000 Applied ($4.50 × 22,000) 99,000 Overapplied overhead $ 6,000 This amount should be reported as an unearned revenue in the current liability section of the January 31 balance sheet. (c) Incurred ($93,000 + $974,000) $1,067,000 Applied ($4.50 × 236,000) 1,062,000 Underapplied overhead $ 5,000 Ex. 127 Klinger Company estimates that annual manufacturing overhead costs will be $1,800,000 for 2002. The actual overhead costs at the end of 2002 are $1,790,000. Activity base information for 2002 follows: Activity Base Estimated Actual Direct Labor Cost $2,000,000 $2,100,000 Direct Labor Hours 180,000 190,000 Machine Hours 200,000 192,000 2- 3 2
Image of page 32

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Job Order Cost Accounting Ex. 127 (cont.) Instructions (a) Compute the predetermined overhead rate for each activity base. (b) Compute the amount of overhead applied in 2002 for each activity base. (c) Compute the amount of under- or overapplied overhead for 2002 for each activity base. Solution 127 (12–16 min.) (a) Predetermined Overhead rate as a % of direct labor cost : $1,800,000 ÷ $2,000,000 = 90% Predetermined Overhead rate per hour of direct labor : $1,800,000 ÷ 180,000 = $10.00 per hour Predetermined Overhead rate per machine hour used : $1,800,000 ÷ 200,000 = $9.00 per machine hour (b) Overhead applied as a % of direct labor cost : (c) Over- or Underapplied Overhead $2,100,000 × .90 = $1,890,000 ($1,890,000 – $1,790,000 = $100,000 Overapplied) Overhead applied per hour of direct labor : 190,000 × $10.00 = $1,900,000 $1,900,000 – $1,790,000 = $110,000 Overapplied) Overhead applied per machine hour used : 192,000 × $9.00 = $1,728,000 ($1,728,000 – $1,790,000 = $62,000 Underapplied) Ex. 128 Urick Manufacturing Company makes specialty tools. In January, Urick incurs manufacturing costs of $12,000,000 for direct materials, direct labor, and overhead. 25% of the total costs represents overhead applied. The overhead rate is $1 for every $2 of direct labor costs incurred. Inventory balances were: January 1 January 31 Raw materials $400,000 $600,000 Work in process 600,000 800,000 Finished goods 400,000 500,000 At the end of January, there was $1,000 of overapplied overhead. Instructions (a) Determine the cost of raw materials purchased in January. (b) Prepare a cost of goods manufactured schedule for January 2002. (c) Compute the cost of goods sold for January. 2- 3 3
Image of page 33
Test Bank for Managerial Accounting, Second Edition Solution 128 (15–20 min.) (a) Overhead applied ($12,000,000 × 25%) = $3,000,000 Direct labor used ($2 × $3,000,000) = $6,000,000 Direct materials used ($12,000,000 – $9,000,000) = $3,000,000 Ending raw materials inventory $ 600,000 Direct materials used 3,000,000 3,600,000 Less: Beginning raw materials inventory 400,000 Raw materials purchases $3,200,000 (b) URICK MANUFACTURING COMPANY Cost of Goods Manufactured Schedule For the Month Ended January 31, 2002 ——————————————————————————————————————————— Work in process, January 1 ............................................... $ 600,000 Direct materials used ........................................................ $3,000,000
Image of page 34

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 35
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern