Exercise 3-14 (20 minutes)
1. The estimated total manufacturing overhead cost is computed as fol-
lows:
Y = $650,000 + ($3.00 per MH)(100,000 MHs)
Estimated fixed manufacturing overhead ……………….
$650,000
Estimated variable manufacturing overhead: $3.00
per MH × 100,000 MHs …………………………………..
300,000
Estimated total manufacturing overhead cost …………
$950,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead …….
$950,000
÷ Estimated total machine-hours (MHs) ……..
100,000
MHs
= Predetermined overhead rate ………………..
$9.50
per MH
2. Total manufacturing cost assigned to Job 400:
Direct materials ……………………………………………….
$ 450
Direct labor …………………………………………………….
210
Manufacturing overhead applied ($9.50 per MH × 40
MHs) …………………………………………………………..
380
Total manufacturing cost ……………………………………
$1,040
3. Computing underapplied/overapplied overhead:
$1,350,000
146,000
$9.50
$1,387,000
$ (37,000)
The closing entry would decrease cost of goods sold by $37,000 and in-
crease net operating income by $37,000.
Exercise 3-15 (continued)
2.
Total manufacturing cost assigned to Job 203:
Direct materials ($500 + $310) …………………….
$810
Direct labor ($70 + $150) …………………………...
220
Cutting Department (80 MHs × $7.50 per MH) ..
$600
Finishing Department (20 DLH × $16.20 per
DLH) …………………………………………………….
324
924
Total manufacturing cost …………………………….
$1,954
3. Yes; if some jobs require a large amount of machine time and a small
amount of labor time, they would be charged substantially less overhead
Exercise 3-17 (45 minutes)
1a. The estimated total manufacturing overhead cost is computed as fol-
lows:
Y = $910,000 + ($3.00 per MH)(50,000 MHs)
Estimated fixed manufacturing overhead ……………….
$ 910,000
Estimated variable manufacturing overhead: $3.00
per MH × 50,000 MHs …………………………………….
150,000
Estimated total manufacturing overhead cost …………
$1,060,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead …….
$1,060,000
÷ Estimated total machine-hours (MHs) ……..
50,000
MHs
= Predetermined overhead rate ………………..
$21.20
per MH
D-70
C–200
Direct materials ……………………………………..………..
$700,000
$550,000
Direct labor …………………………………………..………..
360,000
400,000
Manufacturing overhead applied ($21.20
per MH × 20,000 MHs; $21.20 per MH ×
30,000 MHs) ……………………………………….………..
424,000
636,000
Total manufacturing cost …………………………..
$1,484,000
$1,586,000
1c. Bid prices for Jobs D-70 and C-200:
D-75
C–200
Total manufacturing cost …………………………..
$1,484,000
$1,586,000
× Markup percentage (150%) …………………..………
150%
150%
= Bid price ……………………………………………………..
$2,226,000
$2,379,000
Exercise 3-17 (continued)
2a. Molding Department:
The estimated total manufacturing overhead cost in the Molding Depart-
ment is computed as follows:
Estimated fixed manufacturing overhead ……………….
$700,000
Estimated variable manufacturing overhead: $3.00
per MH × 20,000 MHs …………………………………….
60,000
Estimated total manufacturing overhead cost …………
$760,000
MHs
Estimated total manufacturing overhead cost …………
$300,000
per MH
Exercise 3-17 (continued)
2b. Total manufacturing costs assigned to Jobs D-70 and C-200:
D-70
C-200
Direct materials ………………………………………..
$700,000
$550,000
Direct labor ……………………………………………..
360,000
400,000
Molding Department (14,000 MHs × $38 per
MH; 6,000 MHs × $38 per MH) ………………….
532,000
228,000
Fabrication Department (6,000 MH × $10 per
MH; 24,000 MH × $10 per MH) …………………
60,000
240,000
Total manufacturing cost …………………………...
$1,652,000
$1,418,000
2c. Bid prices for Jobs D-70 and C-200:
D-70
C–200
Total manufacturing cost …………………………..
$1,652,000
$1,418,000
× Markup percentage (150%) …………………………..
150%
150%
= Bid price …………………………………………….……….
$2,478,000
$2,127,000
2d. Because the company has no beginning or ending inventories and
only Jobs D-70 and C-200 were started, completed, and sold during
the year, the cost of goods sold is equal to the sum of the manufac-
turing costs assigned to both jobs of $3,070,000 (=$1,652,000 +
$1,418,000).
3. The plantwide and departmental approaches for applying manufacturing
overhead costs to products produce identical cost of goods sold figures.
However, these two approaches lead to different bid prices for Jobs D–
Exercise 3-18 (30 minutes)
1. The predetermined overhead rate is computed as follows:
Y = $128,000 + $0.80 per MH × 80,000 MHs
Estimated fixed manufacturing overhead ………………
$128,000
Estimated variable manufacturing overhead
$0.80 per MH × 80,000 MHs …………………………...
64,000
Estimated total manufacturing overhead cost …………
$192,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……..
$192,000
÷ Estimated total machine-hours ………………
80,000
MHs
= Predetermined overhead rate ………………..
$2.40
per MH
2. The amount of overhead cost applied to Work in Process for the year
would be: 75,000 machine-hours × $2.40 per machine-hour =
$180,000. This amount is shown in entry (a) below:
Manufacturing Overhead
Maintenance
21,000
(a)
180,000
Indirect materials
8,000
Indirect labor
60,000
Utilities
32,000
Insurance
7,000
Depreciation
56,000
Balance
4,000
Work in Process
Direct materials
710,000
Direct labor
90,000
Overhead (a)
180,000
3. Overhead is underapplied by $4,000 for the year, as shown in the Manu-
facturing Overhead account above. The entry to close out this balance
Cost of Goods Sold ………………………………..
4,000
4,000