The following predictions have been made for 2014 Total factory overhead costs

The following predictions have been made for 2014

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overhead to production. The following predictions have been made for 2014: Total factory overhead costs $150,000 Direct labor hours 40,000 hours Direct labor costs $200,000 Machine hours 60,000 hours
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Required : a. Compute the predetermined factory overhead rate under three different bases: (1) direct labor hours, (2) direct labor costs, and (3) machine hours. b. Assume that actual factory overhead was $152,500 and that Lavender elected to apply factory overhead to Work in Process based on direct labor hours. If actual direct labor was 42,000 hours for 2014, was factory overhead overapplied or underapplied? By how much? c. Lavender Company follows the policy of writing off any under- or overapplied factory overhead balance to Cost of Goods Sold at the end of the year. Make the entry necessary at the end of 2014 to dispose of the factory overhead balance determined in Part (b). a. (1) Direct labor hours: ($150,000/40,000 hours) = $3.75 per DLH (2) Direct labor costs: ($150,000/$200,000) = 75% of DLC (3) Machine hours: ($150,000/60,000 hours) = $2.50 per MH b. Overhead applied (42,000 ´ $3.75) $157,500 Actual overhead 152,500 Overapplied overhead by $ 5,000 c. Factory Overhead 5,000 Cost of Goods Sold 5,000 193. The Custom Guitar Company uses a predetermined overhead rate of $5 per machine hour to apply overhead. During the year, 32,500 machine hours were worked. Actual manufacturing overhead cost for the year was $187,500. Company records showed the following account balances at the end of the year: Materials $ 22,500 Work in process 37,500 Finished goods 50,000 Cost of goods sold 112,500 Required : a. Determine the amount of underapplied or overapplied overhead. b. Assuming the amount of underapplied or overapplied overhead is material, determine underapplied or overapplied overhead that would be allocated to the following accounts if the allocation is made using ending account balances: Work in Process Finished Goods Cost of Goods Sold c. Assuming the amount of underapplied or overapplied overhead is material, calculate the new balance of the following accounts after underapplied or overapplied overhead has been allocated: Work in Process Finished Goods Cost of Goods Sold d. Determine the balance of Cost of Goods Sold if underapplied or overapplied overhead is immaterial.
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a. $25,000 underapplied $18 7,5 00 - ($5 ´ 32, 500 ) b. Work in Process, $4,687.50 $25 ,00 0 ´ ($3 7,5 00/ $20 0,0 00) Finished Goods, $6,250.00 $25 ,00 0 ´ ($5 0,0 00/ $20 0,0 00) Cost of Goods Sold, $14,062.50 $25 ,00 0 ´ ($1 12, 500 /$2 00, 000 ) c. Work in Process, $42,187.50 = $37,500 + $4687.50 Finished Goods, $56,250 = $50,000 + $6,250 Cost of Goods Sold, $126,562.50 = $112,500 + $14,062.50 d. $137,500 = $112,500 + $25,000 194. The Anchorage plant of the Tundra Company produces two calculators and has two production departments: assembly and packaging. Information for the products is given below: Deluxe Regular Total Units produced 20,000 200,000 Prime costs $160,000 $1,500,000 $1,660,000 Direct labor hours 20,000 160,000 180,000 Number of setups 60 40 100 Machine hours 10,000 80,000 90,000 Inspection hours 2,000 16,000 18,000 Number of moves 180 120 300
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The following table presents activity information about the departments and products: Assembly Packaging Total Direct labor hours: Deluxe 10,000 10,000 20,000 Regular 150,000 10,000 160,000 Total 160,000 20,000 180,000 Machine hours: Deluxe 2,000 8,000 10,000 Regular 8,000 72,000 80,000 Total 10,000 80,000 90,000 Overhead Costs: Setting equipment $120,000 $ 120,000 $240,000 Moving material 60,000 60,000 120,000 Machining 20,000 180,000 200,000 Inspection 16,000 144,000 160,000 Total $216,000 $504,000 $720,000 Required : a.
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