FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Patel and Sons Inc. uses a standard cost system to apply factory
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- Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour and the budgeted fixed manufacturing overhead is $2,295,000 per year. The standard quantity of materials is 4 pounds per unit and the standard cost is $10.50 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.50 per hour. The company planned to operate at a denominator activity level of 255,000 direct labor-hours and to produce 170,000 units of product during the most recent year. Actual activity and costs for the year were as follows: Actual number of units produced 204,000 Actual direct labor-hours worked 331,500 Actual variable manufacturing overhead cost incurred $ 961,350 Actual fixed manufacturing overhead cost incurred $ 2,652,000 Required: 4. Determine the reason for any underapplied…arrow_forward[The following information applies to the questions displayed below.] Patel and Sons Incorporated uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs for the year amounted to $245,000, while the actual variable overhead cost per unit was $3.90. Based on the information provided above, provide an appropriate end-of-year closing entry for each of the following two independent situations: (a) the net factory overhead cost variance is closed entirely to Cost of Goods Sold (CSG), and (b) the net…arrow_forwardLane Company manufactures a single product requiring a great deal of hand labor. Overhead cost is applied based on standard direct labor-hours. The budgeted variable manufacturing overhead is $4.80 per direct labor-hour and the budgeted fixed manufacturing overhead is $2,112,000 per year. The standard quantity of materials is 4 pounds per unit and the standard cost is $10.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.40 per hour. The company planned to operate at a denominator activity level of 240,000 direct labor-hours and to produce 160,000 units during the most recent year. Actual activity and costs for the year were as follows: Actual number of units produced 192,000 Actual direct labor-hours worked 312,000 Actual variable manufacturing overhead cost incurred $ 873,600 Actual fixed manufacturing overhead cost incurred $ 2,184,000 Required: Determine the reason for any underapplied or overapplied overhead for…arrow_forward
- Product Costs and Product Profitability Reports, using a Single Plantwide Factory Overhead Rate Isaac Engines Inc. produces three products-pistons, valves, and cams-for the heavy equipment industry. Isaac Engines has a very simple production process and product line and uses a single plantwide factory overhead rate to allocate overhead to the three products. The factory overhead rate is based on direct labor hours. Information about the three products for 20Y2 is as follows: Budgeted Direct Labor Price Per Direct Materials Volume Hours Per Unit Unit Per Unit (Units) Pistons 6,000 0.30 $40 $ 9 Valves 13,000 0.50 21 Cams 1,000 0.10 55 20 The estimated direct labor rate is $20 per direct labor hour. Beginning and ending inventories are negligible and are, thus, assumed to be zero. The budgeted factory overhead for Isaac Engines is $235,200. If required, round all per unit answers to the nearest cent. a. Determine the plantwide factory overhead rate. V per dlh 28 b. Determine the factory…arrow_forwardMike. Inc has two products A and B. The budgeted fixed manufacturing overhead is $10,000. The departmentis expected to work in full capacity. It plans to use cost-based pricing by using the absorption method. Assumethe firm can produce and sell 1,000 units Product A and 1,000 units Product B. Product A Product BDirect Materials $3 $2Direct Labor $1 $3Variable Manufacturing Overhead $2 $1Budgeted labor hours used for each unit product 1 4Budgeted machine hours used for each unit product 3 1Sale Demand 1,000 1,000 Product A…arrow_forwardCan anyone help me fix these problems?arrow_forward
- < Deluxe, Inc. uses a standard cost system and provides the following information. (Click the icon to view the information.) Deluxe allocates manufacturing overhead to production based on standard direct labor hours. Deluxe reported the following actual results for 2024: actual number of units produced, 1,000, actual variable overhead, $5,000, actual fixed overhead, $3,200; actual direct labor hours, 1,400. Read the requirements Data table Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours Print The fixed overhead cost variance is The fixed overhead volume variance is $2,100 $2,800 1,400 hours 700 units 2 hours per unit Done Requirements 1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances. 2. Explain why the variances are favorable or unfavorable irect labor hour was sed Print Done because the total fixed overhead cost was because…arrow_forwardMike. Inc has two products A and B. The budgeted fixed manufacturing overhead is $10,000. The departmentis expected to work in full capacity. It plans to use cost-based pricing by using the absorption method. Assumethe firm can produce and sell 1,000 units Product A and 1,000 units Product B. Product A Product BDirect Materials $3 $2Direct Labor $1 $3Variable Manufacturing Overhead $2 $1Budgeted labor hours used for each unit product 1 4Budgeted machine hours used for each unit product 3 1Sale Demand 1,000 1,000 Product A…arrow_forwardHamid Ltd produces two products – shoes and belts. At present the company uses absorption costing, based on a labour hours rate, to establish the production overhead costs. The budgeted information for Period 4 is shown below. Product Shoes Belts Production in units 6000 5000 Machine hours per unit 5 hrs 6 hours Labour Hour per unit 3 hours 7 hours The overhead and cost driver information for Period 4 is shown below. Activity Cost in (£) Product Inspection 46,200 Machine Set-up 21,000 Machine maintenance 20,800 Handling and Packaging 26,400 Additional information Product inspection – one in every ten products is inspected. Machine set-up – the company uses a single machine to produce both products. For period 4, 300 setups will be made that will be shared equally between both the products. Machine maintenance – this is based on a predetermined number of machine hours. Product handling and packaging – each product…arrow_forward
- Mike. Inc has two products A and B. The budgeted fixed manufacturing overhead is $10,000. The departmentis expected to work in full capacity. It plans to use cost-based pricing by using the absorption method. Assumethe firm can produce and sell 1,000 units Product A and 1,000 units Product B. Product A Product BDirect Materials $3 $2Direct Labor $1 $3Variable Manufacturing Overhead $2 $1Budgeted labor hours used for each unit product 1 4Budgeted machine hours used for each unit product 3 1Sale Demand 1,000 1,000 Product A Product BRequired Investment…arrow_forwardABC Ltd manufactures two products: Basic and Deluxe. The company expects to produce andsell 1,100 units of Basic and 1,600 units of Deluxe during the current year.Currently in the traditional costing system, the company has been using direct labour hours asthe single cost driver for allocation of manufacturing overheads to products. The budgetedmanufacturing overheads for the next period are $35,000.The company is considering to implement the activity-based costing (ABC) system. Theaccountant has analysed the budgeted production overheads and identified various costs inactivity centres with appropriate cost drivers:Activity Centre Costs Cost DriverMaintenance costs $7,000 Direct labour hoursSet up costs $12,000 Number of production runQuality inspections $7,020 Number of inspectionsStores receiving $3,480 Number of component deliveriesStores issues $5,500 Number of issues$35,000The analysis also revealed the following information:Basic DeluxeDirect materials cost per unitDirect labour…arrow_forwardplease step by step solution.arrow_forward
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