Exercise 2-14 (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 2-15 (15 minutes)
1. Cutting Department:
The estimated total manufacturing overhead cost in the Cutting De-
Estimated fixed manufacturing overhead ………………
$264,000
Estimated variable manufacturing overhead
$2.00 per MH × 48,000 MHs …………………………...
96,000
Estimated total manufacturing overhead cost …………
$360,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ….
$360,000
÷ Estimated total machine-hours ……………
48,000
MHs
= Predetermined overhead rate ……………..
$7.50
per MH
Estimated fixed manufacturing overhead ………………
$366,000
Estimated variable manufacturing overhead
$4.00 per DLH × 30,000 DLHs ………………………….
120,000
Estimated total manufacturing overhead cost …………
$486,000
Estimated total manufacturing overhead ….
DLHs
= Predetermined overhead rate ……………..
per DLH
Exercise 2-15 (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 2-16 (15 minutes)
1.
Item (a):
Actual manufacturing overhead costs incurred for the year.
Item (b):
Overhead cost applied to work in process for the year.
Item (c):
Cost of goods manufactured for the year.
Item (d):
Cost of goods sold for the year.
2.
Cost of Goods Sold ……………………………………
70,000
Manufacturing Overhead ……………………….
70,000
Exercise 2-17 (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
1d. 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 (=$1,484,000 +
$1,586,000).
Exercise 2-17 (continued)
2a. Molding Department:
The estimated total manufacturing overhead cost in the Molding Depart-
ment is computed as follows:
Y = $700,000 + ($3.00 per MH)(20,000 MH)
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
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead …….
$760,000
÷ Estimated total machine-hours ……………..
20,000
MHs
= Predetermined overhead rate ……………….
$38.00
per MH
Fabrication Department:
The estimated total manufacturing overhead cost in the Fabrication De-
partment is computed as follows:
Y = $210,000 + ($3.00 per MH)(30,000 MH)
Estimated fixed manufacturing overhead ……………….
$210,000
Estimated variable manufacturing overhead: $3.00
per MH × 30,000 MHs …………………………………….
90,000
Estimated total manufacturing overhead cost …………
$300,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead …….
$300,000
÷ Estimated total direct labor-hours ………….
30,000
MHs
= Predetermined overhead rate ……………….
$10.00
per MH
Exercise 2-17 (continued)
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 2-17 (continued)
Whether a job-order costing system has only one plantwide overhead cost
pool or numerous departmental overhead cost pools does not usually have
Exercise 2-18 (30 minutes)
1. The predetermined overhead rate is computed as follows:
Exercise 2-18 (continued)
4. When overhead is applied using a predetermined rate based on ma-
chine-hours, it is assumed that overhead cost is proportional to ma–
chine-hours. When the actual machine-hours turn out to be 75,000, the
Exercise 2-19 (20 minutes)
1. Because $120,000 of studio overhead was applied to Work in Process on
the basis of $75,000 of direct staff costs, the predetermined overhead
Direct staff costs incurred $75,000
2. The Lexington Gardens Project is the only job remaining in Work in Pro-
cess at the end of the month; therefore, the entire $35,000 balance in
the Work in Process account at that point must apply to it. Recognizing
that the predetermined overhead rate is 160% of direct staff costs, the
Exercise 2-20 (30 minutes)
1.
a.
Raw Materials ………………………………….
325,000
Accounts Payable …………………………
325,000
b.
Work in Process ……………………………….
232,000
Manufacturing Overhead ……………………
58,000
Raw Materials ……………………………..
290,000
c.
Work in Process ……………………………….
60,000
Manufacturing Overhead ……………………
120,000
Wages and Salaries Payable …………..
180,000
d.
Manufacturing Overhead ……………………
75,000
Accumulated Depreciation ……………..
75,000
e.
Manufacturing Overhead ……………………
62,000
Accounts Payable …………………………
62,000
f.
Work in Process ……………………………….
300,000
Manufacturing Overhead ……………….
300,000
Estimated total manufacturing overhead cost
Predetermined =
overhead rate Estimated total amount of the allocation base
$4,800,000
= = $20 per MH
240,000 MHs
15,000 MH × $20 per MH = $300,000
2.
Manufacturing Overhead
Work in Process
(b)
58,000
(f)
300,000
(b)
232,000
(c)
120,000
(c)
60,000
(d)
75,000
(f)
300,000
(e)
62,000
3. The cost of the completed job is $592,000 as shown in the Work in Pro–
Finished Goods …………………………...
Problem 2-21A (45 minutes)
1. The cost of raw materials put into production was:
Raw materials inventory, 1/1 ……………..
$ 15,000
Debits (purchases of materials) ………….
120,000
Materials available for use …………………
135,000
Raw materials inventory, 12/31 ………….
25,000
Materials requisitioned for production ….
$110,000
2. Of the $110,000 in materials requisitioned for production, $90,000 was
als.
3.
Total factory wages accrued during the year (credits to
the Factory Wages Payable account) ………………………..
$180,000
Less direct labor cost (from Work in Process) ……………….
150,000
Indirect labor cost ………………………………………………….
$ 30,000
4. The cost of goods manufactured was $470,000—the credits to the Work
5. The Cost of Goods Sold for the year was:
Finished goods inventory, 1/1 …………………………………….
$ 40,000
Add: Cost of goods manufactured (from Work in Process) ..
470,000
Goods available for sale …………………………………………….
510,000
Finished goods inventory, 12/31 ………………………………….
60,000
Cost of goods sold ……………………………………………………
$450,000
6. The predetermined overhead rate was:
Estimated total manufacturing overhead cost
Predetermined =
overhead rate Estimated total amount of the allocation base
$240,000 160% of direct
= = labor cost
$150,000 direct labor cost
Problem 2-21A (continued)
7. Manufacturing overhead was overapplied by $10,000, computed as fol-
lows:
Actual manufacturing overhead cost for the year (debits) .
$230,000
Applied manufacturing overhead cost (see Work in Pro-
cess—this would have been the credits to the
Manufacturing Overhead account) …………………………..
240,000
Overapplied overhead ……………………………………………..
$(10,000)
8. The ending balance in Work in Process is $30,000. Direct materials
make up $9,200 of this balance, and manufacturing overhead makes up
Problem 2-22A (30 minutes)
1. The predetermined overhead rate was:
Estimated fixed manufacturing overhead ………………
$795,000
Estimated variable manufacturing overhead
$1.40 per computer hour × 75,000 hours……………
105,000
Estimated total manufacturing overhead cost …………
$900,000
hours
per hour
Actual manufacturing overhead cost …………………..
Underapplied overhead cost ……………………………..
Cost of Goods Sold ……………………………..
Problem 2-23A (30 minutes)
Schedule of cost of goods manufactured:
Direct materials:
Raw materials inventory, beginning* ……….
$ 40,000
Add: Purchases of raw materials* …………..
290,000
Raw materials available for use ……………..
330,000
Deduct: Raw materials inventory, ending* .
10,000
Raw materials used in production …………..
$320,000
Direct labor ………………………………………….
78,000
Manufacturing overhead applied* ……………..
285,000
Total manufacturing costs* ……………………..
683,000
Add: Work in process inventory, beginning …
42,000
725,000
Deduct: Work in process inventory, ending* .
35,000
Cost of goods manufactured ……………………
$690,000
Finished goods inventory, beginning* ………..
$ 50,000
Add: Cost of goods manufactured …………….
690,000
Cost of goods available for sale* ………………
740,000
Deduct: Finished goods inventory, ending …..
80,000
Unadjusted cost of goods sold* ………………..
660,000
Deduct: Overapplied overhead …………………
15,000
Adjusted cost of goods sold …………………….
$645,000
Sales …………………………………………………
Cost of goods sold ($660,000 – $15,000) …..
Gross margin ……………………………………….
Selling and administrative expenses:
Selling expenses* ………………………………
Administrative expense* ………………………
100,000
Net operating income* …………………………..
Problem 2-24A (30 minutes)
1. Molding Department:
The estimated total manufacturing overhead cost in the Molding De-
Estimated fixed manufacturing overhead ………………
$497,000
Estimated variable manufacturing overhead:
$1.50 per MH × 70,000 MHs …………………………...
105,000
Estimated total manufacturing overhead cost …………
$602,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……
$602,000
÷ Estimated total machine-hours …………….
70,000
MHs
= Predetermined overhead rate ………………
$8.60
per MH
Estimated fixed manufacturing overhead ………………
$615,000
Estimated variable manufacturing overhead:
$2.00 per DLH × 60,000 DLHs ………………………….
120,000
Estimated total manufacturing overhead cost …………
$735,000
Estimated total manufacturing overhead ……
$735,000
÷ Estimated total DLHs ………………………….
DLHs
= Predetermined overhead rate ………………
per DLH
Problem 2-24A (continued)
2.
Molding Department overhead applied:
110 machine-hours × $8.60 per machine-hour
$ 946
Painting Department overhead applied:
84 direct labor-hours × $12.25 per DLH ……….
1,029
Total overhead cost …………………………..………….
$1,975
3. Total cost of Job 205:
Molding
Dept.
Painting
Dept.
Total
Direct materials ……………………..
$ 470
$ 332
$ 802
Direct labor …………………………..
325
588
913
Manufacturing overhead applied ..
946
1,029
1,975
Total cost ……………………………..
$1,741
$1,949
$3,690
Unit product cost for Job 205:
Total manufacturing cost ……………………..
$3,690
÷ Number of units in the job …………………
50
units
= Unit product cost …………………………….
$73.80
per unit
4.
Molding
Dept.
Painting
Dept.
Manufacturing overhead incurred …………
$570,000
$750,000
Manufacturing overhead applied:
65,000 MHs × $8.60 per MH …………….
559,000
62,000 direct labor-hours × $12.25 per
direct labor-hour ………………………….
759,500
Underapplied (or overapplied) overhead ..
$ 11,000
$ (9,500)
Problem 2-25A (60 minutes)
1. a.
Estimated total manufacturing overhead cost
Predetermined=
overhead rate Estimated total amount of the allocation base
$800,000
= =160%
$500,000 direct materials cost
b. Before the underapplied or overapplied overhead can be computed,
Problem 2-25A (continued)
2.
Gitano Products
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning ……………
$ 20,000
Add purchases of raw materials …………………
510,000
Total raw materials available …………………….
530,000
Deduct raw materials inventory, ending ………
80,000
Raw materials used in production…………………
$ 450,000
Direct labor ……………………………………………..
90,000
Manufacturing overhead applied to work in
process …………………………..……………………
720,000
Total manufacturing costs ………………………….
1,260,000
Add: Work in process, beginning ………………….
150,000
1,410,000
Deduct: Work in process, ending …………………
70,000
Cost of goods manufactured ……………………….
$1,340,000
3.
Unadjusted cost of goods sold:
Finished goods inventory, beginning ………………
$ 260,000
Add: Cost of goods manufactured ………………….
1,340,000
Goods available for sale ………………………………
1,600,000
Deduct: Finished goods inventory, ending ……….
400,000
Unadjusted cost of goods sold ………………………
$1,200,000
4.
Direct materials ……………………………………………
$ 8,500
Direct labor …………………………………………………
2,700
Overhead applied ($8,500 × 160%) …………………
13,600
Total manufacturing cost ……………………………….
$24,800
$24,800 × 125% = $31,000 price to the customer