Total cost (First quarter) ……………………………………..
Variable cost element ($0.60 per unit × 80,000 units) .
Fixed cost element …………………………………………….
Estimated fixed manufacturing overhead ………………
Estimated total manufacturing overhead cost …………
Exercise 4-13 (30 minutes)
1.
Units
Produced
Manufacturing
Overhead
High activity level (First quarter) …
80,000
$228,000
Low activity level (Third quarter) …
20,000
192,000
Change ………………………………….
60,000
$36,000
22 Managerial Accounting for Managers, 4th Edition
Exercise 4-13 (continued)
2. The fixed portion of the manufacturing overhead cost is causing the unit
fewer units.
3. The unit product cost can be stabilized by using a predetermined
Estimated fixed manufacturing overhead ………………
Estimated variable manufacturing overhead
$0.60 per unit × 200,000 units …………………………
Estimated total manufacturing overhead cost …………
The annual predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ….
$840,000
÷ Estimated total units produced ……………
200,000
= Predetermined overhead rate ……………..
$4.20
per unit
demand on unit product costs.
Exercise 4-14 (10 minutes)
Yes, overhead should be applied to value the Work in Process inventory at
year-end.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Exercise 4-15 (45 minutes)
1 a. The estimated total manufacturing overhead cost is computed as
follows:
Estimated fixed manufacturing overhead ………………
$1,100,000
Estimated variable manufacturing overhead
$5.00 per MH × 50,000 MHs …………………………...
250,000
Estimated total manufacturing overhead cost …………
$1,350,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……..
$1,350,000
÷ Estimated total machine-hours (MHs) ……..
50,000
MHs
= Predetermined overhead rate ………………..
$27.00
per MH
1 b and 1 c. Total manufacturing cost assigned to Jobs D-75 and C-100:
D-75
C–100
Direct materials …………………………...
$ 700,000
$ 550,000
Direct labor …………………………………
360,000
400,000
Manufacturing overhead applied
($27.00 per MH × 20,000 MHs;
$27.00 per MH × 30,000 MHs) …….
540,000
810,000
Total manufacturing cost ………………..
$1,600,000
$1,760,000
Bid prices for Jobs D-75 and C-100:
D-75
C–100
Total manufacturing cost ………………..
$1,600,000
$1,760,000
× Markup percentage ……………………
150%
150%
= Bid price ………………………………….
$2,400,000
$2,640,000
1 d. Because the company has no beginning or ending inventories and
Estimated fixed manufacturing overhead ………………
Estimated total manufacturing overhead cost …………
$450,000
Estimated total manufacturing overhead …….
= Predetermined overhead rate ………………..
$15.00
per MH
Exercise 4-15 (continued)
2 a. Molding Department:
The estimated total manufacturing overhead cost in the Molding
Department is computed as follows:
Estimated fixed manufacturing overhead ………………
$800,000
Estimated variable manufacturing overhead
$5.00 per MH × 20,000 MHs …………………………...
100,000
Estimated total manufacturing overhead cost …………
$900,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead …….
$900,000
÷ Estimated total machine-hours ………………
20,000
MHs
= Predetermined overhead rate ………………..
$45.00
per MH
Fabrication Department:
The estimated total manufacturing overhead cost in the Fabrication
Department is computed as follows:
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
26 Managerial Accounting for Managers, 4th Edition
Exercise 4-15 (continued)
2b and 2c. Total manufacturing costs assigned to Jobs D-75 and C-100:
D-75
C-100
Direct materials ………………………
$700,000
$550,000
Direct labor …………………………...
360,000
400,000
Molding Department
(15,000 MHs × $45 per MH;
5,000 MHs × $45 per MH)……..
675,000
225,000
Fabrication Department
(5,000 MH × $15 per MH;
25,000 MH × $15 per MH) …….
75,000
375,000
Total manufacturing cost ………….
$1,810,000
$1,550,000
Bid prices for Jobs D-75 and C-100:
D-75
C–100
Total manufacturing cost ………….
$1,810,000
$1,550,000
× Markup percentage ………………
150%
150%
= Bid price…………………………….
$2,715,000
$2,325,000
2 d. Because the company has no beginning or ending inventories and
3. The plantwide and departmental approaches produce identical cost of
goods sold figures. However, these two approaches lead to different bid
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 4 27
Exercise 4-15 (continued)
Whether a job-order costing system has only one plantwide overhead
cost pool or numerous departmental overhead cost pools does not
Problem 4-16 (30 minutes)
1. $320,000 of studio overhead cost was applied to jobs on the basis of
Solutions Manual, Chapter 4 29
Problem 4-16 (continued)
We can now complete the job cost sheet for the Krimmer Corporation
Headquarters project:
Costs of subcontracted work ………
$ 4,900
Direct staff costs ……………………..
13,500
Studio overhead ………………………
21,600
Total cost to January 31 ……………
$40,000
30 Managerial Accounting for Managers, 4th Edition
Problem 4-17 (30 minutes)
1. The actual manufacturing overhead costs incurred were as follows:
Reference
(a)
Indirect materials ……………………………..
$ 8,000
(b)
Factory utilities …………………………………
14,600
(c)
Factory depreciation ………………………….
21,000
(d)
Indirect labor …………………………………..
18,000
(e)
Factory insurance ……………………………..
2,400
Total manufacturing overhead incurred …
$64,000
Manufacturing overhead incurred …………………………
$64,000
Manufacturing overhead applied ($40,000 × 150%) …
60,000
Overhead underapplied………………………………………
$ 4,000
2. The cost of goods sold (before adjustment for the underapplied
overhead) is $120,000—the cost to manufacture the goods that were
sold according to their job cost sheets. The adjusted cost of goods sold
is determined as follows:
Unadjusted cost of goods sold ..
$120,000
Add: Underapplied overhead …..
4,000
Cost of goods sold ………………..
$124,000
Reference
(c)
Depreciation expense ………………………..
$ 7,000
(d)
Sales commissions expense ………………..
10,400
(d)
Administrative salaries expense ……………
25,000
(e)
Insurance expense …………………………...
600
(f)
Miscellaneous expense ……………………….
18,000
Total selling and administrative expense ..
$61,000