15 Minutes, Easy PROBLEM 17.2
A
O’SHAUGHNESSY MFG. CO.
General Journal
a. Materials Inventor
y
59,700
Accounts Payabl
e
59,700
c. Work in Process Inventor
y
30,000
Direct Labo
r
30,000
To record direct labor costs applicable to production
in March, per employees’ time cards.
d. Direct Labo
r
26,300
e
f. Work in Process Inventor
y
36,000
Manufacturing Overhead 36,000
To record overhead applied to production during March
($18 per labor hour × 2,000 hours = $36,000).
g. Finished Goods Inventor
y
116,000
y
Cost of Goods Sold 128,000
Finished Goods Inventor
y
128,000
To record cost of units sold during March.
y
30 Minutes, Medium PROBLEM 17.3
A
GEORGIA WOODS, INC.
Total cost of job no. 58 88,200$
c.
Accounts Receivable (City Furniture
)
Sales 147,000
To record revenue from sale to City Furniture.
147,000
General Journal
Total cost of job no. 399 44,000$
Unit cost, $44,000 ÷ 4,000 units 11$
c.
Accounts Receivable (SkiCraft Boats
)
Sales 19,500
d.
Dept. B
Actual overhead for the yea
r
424,400$
Overhead applied:
17,000 machine-hours × $30 per hou
r
26,000 direct labor hours × $16.50 per hou
r
429,000
510,000
Dept. A
517,000$
General Journal
19,500
35 Minutes, Medium PROBLEM 17.5
A
Y
E OLDE BUMP & GRIND, INC.
a.
(
1
)
123,000$ 10,000 12.30$
(
2
)
123,000$ 300 410$
(
)
Overhead application rate based on direct labor hours:
Estimated total overhead
Estimated direct labor hours
Overhead application rate per direct labor hour ($123,000 ÷ 10,000 hours)
Overhead application rate based upon number of repair jobs:
Estimated total overhead
(
)
PROBLEM 17.5
A
Y
E OLDE BUMP & GRIND, INC. (concluded)
c.
In this business, direct labor hours appear to be the major causal factor in the incurrence of
overhead costs. The use of indirect materials (sandpaper, welding materials, and metal putty) is
Comments on the alternative overhead applications:
Allocating overhead based upon the number of jobs assumes that each repair job should be
charged with an equal amount ($410) of overhead. This allocation method ignores the fact
Job 1. Relative to Job 1, Job 2 probably requires more indirect materials, more indirect
l b d f ili i d hi h l Th f J b 2
30 Minutes, Medium PROBLEM 17.6
A
NORTON CHEMICAL COMPAN
Y
a.
base. % of total
1 20%
4 80%
5 100%
Employees responsible for inspecting
Employees in the department
Assigning purchasing department costs to activity pools:
Step 1:
Employees responsible for ordering
Establish the percent of purchasing department
costs to be assi
g
ned to each activit
y
cost pool
usin
g
the number of emplo
y
ees as an activit
y
Assign total purchasing department costs of
$80,000 to each activit
y
cost pool based on the
Step 2:
PROBLEM 17.6
A
NORTON CHEMICAL COMPANY (concluded
)
c.
% of total
1
,
800 75%
600 25%
2
,
400 100%
,
,
(1)
Inspections for Bitrite
Total inspections
of inspections as an activit
y
base.
Inspection cost pool allocated to product lines:
Step 1: Establish the percent of inspection cost pool to be
allocated to each product line usin
g
the number
Inspections for Amithol
Step 2:
in two ways:
Allocate $64,000 in the inspection cost pool
to each product line based on the percenta
g
es
The company needs to work more closely with the supplier of materials used to make
,
45 Minutes, Strong PROBLEM 17.7
A
DIXON ROBOTICS
a.
20,000 MH
15,000 MH
5,000 MH
40,000 MH
Com
p
ute the overhead a
pp
lication rate
p
er MH:
Com
p
ute re
q
uired machine hours on a
p
er-unit basis:
3.0 MH per unit
BC11 (15,000 MH ÷ 5,000 units)
BC11
C3PO
Step 2:
Maintenance department costs allocated to each product line on a
per-unit basis using machine hours (MH):
Compute total MH at “normal” production levels:
Step 3:
Total MH at normal production levels
Step 1:
A3B4
PROBLEM 17.7
A
DIXON ROBOTICS (continued)
b.
% of total
400 20%
1
,
600 80%
2
,
000 100%
,
,
g
,
,
,
,
Assigning maintenance department costs to activity pools:
Work orders for
j
anitorial activities
Work orders for repair activities
Step 1:
Establish the percent of maintenance department
costs to be assi
g
ned to each activit
y
cost pool
usin
g
the number of work orders as an
activit
y
base.
Total work orders issued
Assi
g
n total maintenance department costs of
$100,000 to each activit
y
cost pool based on the
Step 2:
percenta
g
es computed in step 1.
,
PROBLEM 17.7
A
DIXON ROBOTICS (concluded)
% of total
Allocating janitorial cost pool to product lines:
Establish the percent of janitorial cost pool to be
allocated to each product line using square
footage occupied as an activity base.
Step 1: