This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
Solutions Manual, Chapter 4 31
Problem 4-17 (continued)
Durham Company
Income Statement
For the Year Ended December 31
Sales ………………………………………….
$200,000
Cost of goods sold …………………………
124,000
Gross margin ………………………………..
76,000
Selling and administrative expenses …..
61,000
Net operating income …………………….
$ 15,000
32 Managerial Accounting for Managers, 4th Edition
Problem 4-18 (30 minutes)
1.
Williams
Chandler
Nguyen
Designer-hours ………………………
200
80
120
Predetermined overhead rate …….
× $45
× $45
× $45
Overhead applied ……………………
$9,000
$3,600
$5,400
2. The cost of goods manufactured is the total cost of all jobs completed
during May, which is $22,600 as shown below:
Williams
Chandler
Total
$ 4,800
$1,800
2,400
1,000
9,000
3,600
$16,200
$6,400
$22,600
3. The Nguyen project was the only job still in progress at the end of May.
Direct materials ………………………………..
$ 3,600
Direct labor ……………………………………..
1,500
Overhead applied ……………………………..
5,400
Total cost in work in process ……………….
$10,500
4.
Overhead cost incurred ………………………………………..
$16,000
Overhead cost applied ($9,000 + $3,600 + $5,400) …..
18,000
Overapplied overhead ………………………………………….
$ 2,000
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
Problem 4-19 (45 minutes)
1. The actual manufacturing overhead costs incurred were as follows:
Reference
(a)
Indirect materials ……………………………..
$ 38,000
(b)
Indirect labor …………………………………..
18,000
(c)
Factory heat, power, and water ……………
42,000
(d)
Factory insurance ……………………………..
9,000
(f)
Factory depreciation ………………………….
51,000
Total manufacturing overhead incurred …
$158,000
jobs:
$153,000 =$4.25 per MH; 40,000 MHs×$4.25 per MH=$170,000.
36,000 MHs
Therefore, the overhead was overapplied by $3,000.
Manufacturing overhead incurred ………..
$158,000
Manufacturing overhead applied
(40,000 MHs × $4.25 per MH) ………….
170,000
Overhead overapplied ……………………….
$ 12,000
2. The cost of goods sold for the year (before adjustment for underapplied
Unadjusted cost of goods sold ………………….
$475,000
Deduct: Overapplied overhead ………………….
12,000
Cost of goods sold ………………………………….
$463,000
The selling and administrative expenses for the year were:
Reference
(b)
Sales commissions …………………………….
$ 10,000
(b)
Administrative salaries ……………………….
25,000
(d)
Insurance ……………………………………….
1,000
(e)
Advertising ………………………………………
50,000
(f)
Depreciation ……………………………………
9,000
Total selling and administrative expense ..
$95,000
34 Managerial Accounting for Managers, 4th Edition
Problem 4-19 (continued)
Ravsten Company
Income Statement
For the Year Ended December 31
Sales ……………………………………………
$700,000
Cost of goods sold …………………………..
463,000
Gross margin ………………………………….
237,000
Selling and administrative expense ……..
95,000
Net operating income ………………………
$142,000
Problem 4-20 (30 minutes)
1. The predetermined overhead rate was:
Estimated fixed manufacturing overhead ………………
$1,275,000
Estimated variable manufacturing overhead
$3.00 per computer hour × 85,000 hours……………
255,000
Estimated total manufacturing overhead cost …………
$1,530,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……..
$1,530,000
÷ Estimated total computer hours ……………..
85,000
hours
= Predetermined overhead rate ………………..
$18.00
per hour
2.
Actual manufacturing overhead cost …………………..
$1,350,000
Manufacturing overhead cost applied to Work in
Process during the year: 60,000 actual computer
hours × $18 per computer hour ……………………..
1,080,000
Underapplied overhead cost ……………………………..
$ 270,000
3.
Unadjusted cost of goods sold………………………..
$2,800,000
Underapplied overhead cost …………………………..
270,000
Adjusted cost of goods sold …………………………..
$3,070,000
Estimated fixed manufacturing overhead ………………
Estimated total manufacturing overhead cost …………
$720,000
Estimated total manufacturing overhead ……
= Predetermined overhead rate ………………
per DLH
Problem 4-21 (45 minutes)
1. Preparation Department:
The estimated total manufacturing overhead cost in the Preparation
Department is computed as follows:
Estimated fixed manufacturing overhead ………………
$256,000
Estimated variable manufacturing overhead:
$2.00 per MH × 80,000 MHs …………………………...
160,000
Estimated total manufacturing overhead cost …………
$416,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ……
$416,000
÷ Estimated total machine-hours …………….
80,000
MHs
= Predetermined overhead rate ………………
$5.20
per MH
Fabrication Department:
Department is computed as follows:
Solutions Manual, Chapter 4 37
Problem 4-21 (continued)
2.
Preparation Department overhead applied:
350 machine-hours × $5.20 per machine-hour …..
$1,820
Fabrication Department overhead applied:
130 direct labor-hours × $14.40 per labor-hour ….
1,872
Total overhead cost ………………………………………..
$3,692
3. Total cost of Job 127:
Preparation
Fabrication
Total
Direct materials …………….
$ 940
$1,200
$2,140
Direct labor ………………….
710
980
1,690
Manufacturing overhead …
1,820
1,872
3,692
Total cost ……………………
$3,470
$4,052
$7,522
Unit product cost for Job 127:
Total manufacturing cost ……………………..
$7,522
÷ Number of units in the job …………………
25
units
= Unit product cost …………………………….
$300.88
per unit
4.
Preparation
Fabrication
Manufacturing overhead cost incurred …..
$390,000
$740,000
Manufacturing overhead cost applied:
73,000 machine-hours × $5.20 per
machine-hour ……………………………..
379,600
54,000 direct labor-hours × $14.40
per direct labor-hour …………………….
777,600
Underapplied (or overapplied) overhead ..
$ 10,400
$(37,600)
Problem 4-22 (45 minutes)
1. Research & Documents predetermined overhead rate:
Estimated total overhead cost
Predetermined=
overhead rate Estimated total amount of the allocation base
$700,000
= =$35 per hour
20,000 hours
Litigation predetermined overhead rate:
Estimated total overhead cost
Predetermined=
overhead rate Estimated total amount of the allocation base
$320,000 40% of direct
==
attorney cost
$800,000 direct attorney cost
2.
Research & Documents overhead applied:
18 hours × $35 per hour ……………………………..
$ 630
Litigation overhead applied: $2,100 × 40% ……….
840
Total overhead cost ………………………………………
$1,470
3. Total cost of Case 618–3:
Departments
Research &
Documents
Litigation
Total
Materials and supplies ………..
$ 50
$ 30
$ 80
Direct attorney cost ……………
410
2,100
2,510
Overhead cost applied ………..
630
840
1,470
Total cost ………………………..
$1,090
$2,970
$4,060
Solutions Manual, Chapter 4 39
Problem 4-22 (continued)
4.
Department
Research &
Documents
Litigation
Departmental overhead cost incurred ……
$770,000
$300,000
Departmental overhead cost applied:
23,000 hours × $35 per hour ……………
805,000
$775,000 × 40% …………………………...
310,000
Underapplied (or overapplied) overhead ..
$ (35,000)
$ 10,000
40 Managerial Accounting for Managers, 4th Edition
Problem 4-23 (30 minutes)
1. To determine the cost of goods sold using the direct method, we must
determine the unit product costs for the two jobs from which units were
sold. We can then determine the unadjusted cost of goods sold as
follows:
Job A256
Job A258
Total
Beginning balance …………………..
$1,200
$ 0
Direct materials ………………………
2,600
1,400
Direct labor …………………………...
800
600
Manufacturing overhead applied ..
1,200
900
Total (a) ……………………………….
$5,800
$2,900
Units completed (b) …………………
100
200
Unit product cost (a) ÷ (b) ……….
$58.00
$14.50
Units sold ……………………………..
80
40
Unadjusted cost of goods sold …..
$4,640
$580
$5,220
as follows:
Unadjusted cost of goods sold (see above) ….
$5,220
Deduct: Overapplied overhead ………………….
800
Cost of goods sold ………………………………….
$4,420
2. The value of ending finished goods inventory can be determined using
the unit product costs computed above:
Job A256
Job A258
Total
Units completed ……………………..
100
200
Deduct: Units sold …………………..
80
40
Units in ending inventory ………….
20
160
Unit product cost ……………………
$58.00
$14.50
Total cost of ending finished
goods inventory ……………………
$1,160
$2,320
$3,480