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86.
What are the total manufacturing overhead costs allocated to the Strollers for the current
month?
87.
What are the total manufacturing overhead costs allocated to the Car Seats for the current
month?
Essay Questions
88.
Objectives of a cost accounting system
What are the major objectives of a cost accounting system in a manufacturing company?
89.
Accounting terminology
Listed below are nine technical accounting terms introduced or emphasized in this chapter:
Each of the following statements may (or may not) describe one of these technical terms.
In the space provided below each statement, indicate the accounting term described, or
answer "None" if the statement does not correctly describe any of the terms.
_____ (a) The balance remaining in the Manufacturing Overhead account when the
overhead application rate used during the period is too low.
_____ (b) The account credited as component parts are transferred into production.
_____ (c) A schedule used to accumulate manufacturing costs and to determine the unit
costs associated with a specific customer's order.
_____ (d) The inventory account credited when the cost of goods sold is recorded.
_____ (e) The type of cost accounting system most likely used by an oil refinery engaged in
the continuous production of petroleum products.
_____ (f) The inventory account debited when manufacturing cost accounts (such as Direct
Labor or Materials Inventory) are credited.
_____ (g) The type of cost accounting system likely to be used by a machine shop that
manufactures items to the specifications provided by its customers.
90.
Application of overhead
Pyramid Corporation manufactures a single product. As a basis for determining an
overhead application rate, the production manager made the following estimates for the
coming year:
In the following month, 19,500 units were produced, involving direct labor costs of $78,000
and requiring 1,073 machine-hours.
Determine the amount of manufacturing overhead to be applied to production during this
month, assuming that the overhead application rate is based upon:
(a) Estimated total direct labor cost for the year. $___________
(b) Estimated total machine-hours for the year. $___________
91.
Application of overhead - missing information
Holden Corporation manufactures a single product. Overhead is applied to production
during the year using a predetermined rate based on direct labor cost. During the month of
April, 50,000 units of output were produced at a total direct labor cost of $425,000. The
amount of overhead applied to these units was $2,125,000. Assuming total direct labor cost
for the year had been estimated to be $4,125,000, calculate the amount of manufacturing
overhead Holden Corporation had estimated it would incur during the year.
What is estimated total manufacturing overhead cost for the year?
92.
Overhead application
For a single product manufacturing company, all overhead must be assigned to the one
product. Since this is the case, why would such a firm not simply assign actual overhead
cost to production as it is incurred throughout the year?
93.
Overhead application rate
Define the term cost driver and explain the role of this item in the computation of an
overhead application rate.
17-47
94.
Langdon Company manufactures custom designed toy sailboats. The company uses a job
order costing system. Overhead is applied based on direct labor hours. Estimated overhead
for 2015 is $11,840 and the company estimates it will use 7,400 direct labor hours. The
following events occurred in March.
(a.) The company purchased materials for $800 on account.
(b.) The production supervisor requisitioned 15 sheets of fiberglass for constructing the
boats. The fiberglass was in stock and originally cost $3 a sheet.
(c.) Direct labor on the boats cost $500.
(d.) More materials were purchased for $350 on account.
(e.) Indirect labor costs were $210.
(f.) A utility bill for the boat factory was $230 and was paid in cash.
(g.) A repair bill for the salesman's car was $75 and will be paid next month.
(h.) Additional materials were placed into production which cost $215.
(i.) Manufacturing overhead was applied (direct labor during March totaled 500 hours).
(j.) One sailboat was completed which cost $325.
(k.) The completed sailboat was sold for $750. Record the sale and the cost of sale.
Required:
(1.) Determine the overhead application rate.
(2.) Prepare journal entries for the above transactions.
(3.) What is the cost of the remaining Work in Process?
17-49
95.
Job order cost system-journal entries
Paxton Products, which uses a job order cost system, completed the following transactions
during the current month:
(A) Materials costing $75,000 were used on various jobs.
(B) Time cards of direct workers indicate direct labor costs of $125,000 for the month.
(C) Overhead is applied to jobs at a rate of 75% of direct labor cost.
(D) Jobs with total accumulated costs of $165,000 were finished during the month.
(E) Units costing $210,000 were sold during the month at sales prices totaling $390,000. All
sales were on account.
In the space provided, prepare a general journal entry for the month summarizing each of
the above categories of transactions. Explanations may be omitted.
96.
Job order cost system-journal entries
Shown below is a partial list of accounts for Miles Mfg. Co., followed by a list of
transactions. Indicate the accounts that would be debited and credited in recording each
transaction by placing the appropriate account numbers in the space provided. The
company uses a job order cost accounting system.
