Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and appliesmanufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formulathat estimates $765,000 of total manufacturing overhead for an estimated activity level of 85,000 machine-hours.During the year, a large quantity of furniture on the market caused Luzadis to cut production and build inventories. The companyprovided the following data for the year:Machine-hoursManufacturing overhead costInventories at year-end:Raw materialsWork in process (includes overhead applied of $62,100)Finished goods (includes overhead applied of $105,570)Cost of goods sold (includes overhead applied of $453,330)Required:1. Compute the underapplied or overapplied overhead.69,000$ 719,000$ 14,000$ 183,000$ 311,100$ 1,335,9002. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry.3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Costof Goods Sold. Prepare the appropriate journal entry.4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work inProcess, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?Complete this question by entering your answers in the tabs below.Required 1 Required 2 Required 3 Required 4Compute the underapplied or overapplied overhead.< Required 1Required 2 >

Manufacturing overhead: It is the indirect cost incurred as a part of manufacturing the products.…

Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? Complete this question by entering your answers in the tabs below.

Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3. Assume the company allocates underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry. 4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold? Complete this question by entering your answers in the tabs below.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 17E: Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the...

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Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
Shumaker Company manufactures a line of high-top basketball shoes. At the beginning of the year, the following plans for production and costs were revealed: During the year, a total of 50,000 units were produced and sold. The following actual costs were incurred: There were no beginning or ending inventories of raw materials. In producing the 50,000 units 63,000 hours were worked, 5% more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labor hours. Required: 1. Using a flexible budget, prepare a performance report comparing expected costs for the actual production with actual costs. 2. Determine the following: (a) Fixed overhead spending and volume variances and (b) Variable overhead spending and efficiency variances.
Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 80,000. b. Requisitioned raw materials to production, 80,000. c. Distributed direct labor costs, 10,000. d. Factory overhead costs incurred, 60,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 225,000, on account.
Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500 machine hours. The cost to make Job 416 is $95 in neon, 15 hours of labor at $13 per hour, and five machine hours. During the month, it incurs $95 in indirect material cost, $130 in administrative labor, $320 in utilities, and $350 in depreciation expense. What is the predetermined overhead rate if machine hours are considered the cost driver? What is the cost of Job 416? What is the overhead incurred during the month?
Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Required: 1. Prepare a scattergraph, plotting the receiving costs against the number of purchase orders. Use the vertical axis for costs and the horizontal axis for orders. 2. Select two points that make the best fit, and compute a cost formula for receiving costs. 3. Using the high-low method, prepare a cost formula for the receiving activity. 4. Using the method of least squares, prepare a cost formula for the receiving activity. What is the coefficient of determination?
Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products based on machine-hours. The predetermined overhead rate was based on a cost formula that estimates $900,000 of total manufacturing overhead for an estimated activity level of 75,000 machine-hours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and build inventories. The company provided the following data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: 60,000 $ 850,000 Raw materials Work in process (includes overhead applied of $36,000) Finished goods (includes overhead applied of $180,000) Cost of goods sold (includes overhead applied of $504,000) Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. 3.…
Luzadis Company makes furniture using the latest automated technology. The company uses a job - order costing system and applies manufacturing overhead cost to products based on machine - hours. The predetermined overhead rate was based on a cost formula that estimates $1, 520,000 of total manufacturing overhead for an estimated activity level of 76, 000 machine - hours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and build inventories. The company provided the following data for the year: Machine - hours 64, 000 Manufacturing overhead cost $ 1, 471,000 Inventories at year - end: Raw materials S 14,000 Work in process (includes overhead applied of $64, 000) $ 90,500 Finished goods (includes overhead applied of $204, 800) S 289,600 Cost of goods sold (includes overhead applied of $1, 011, 200) $ 1,429, 900 Required: Compute the underapplied or overapplied overhead. Assume the company closes underapplied or overapplied overhead to Cost of…
Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,368,000 of total manufacturing overhead for an estimated activity level of 72,000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year: Machine-hours 61,000 Manufacturing overhead cost $ 1,324,000 Inventories at year-end: Raw materials $ 16,000 Work in process (includes overhead applied of $115,900) $ 188,000 Finished goods (includes overhead applied of $208,620) $ 338,400 Cost of goods sold (includes overhead applied of $834,480) $ 1,353,600 Required: 1. Compute the underapplied or…
Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,368,000 of total manufacturing overhead for an estimated activity level of 72,000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year: Machine-hours 61,000 Manufacturing overhead cost $ 1,324,000 Inventories at year-end: Raw materials $ 16,000 Work in process (includes overhead applied of $115,900) $ 188,000 Finished goods (includes overhead applied of $208,620) $ 338,400 Cost of goods sold (includes overhead applied of $834,480) $ 1,353,600 Required: 1. Compute the underapplied or…
Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $1,207,000 of total manufacturing overhead for an estimated activity level of 71,000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year. Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $46,750) Finished goods (includes overhead applied of $187,000) Cost of goods sold (includes overhead applied of $701,250) Required: 1. Compute the underapplied or overapplied overhead. 2. Assume that the company closes any underapplied or overapplied…
uzadis Company makes furniture using the latest automated technology. The company uses a ob-order costing system and applies manufacturing overhead cost to products based on nachine-hours. The predetermined overhead rate was based on a cost formula that estimates $592,000 of total manufacturing overhead for an estimated activity level of 74,000 machine- ours. During the year, a large quantity of furniture on the market caused Luzadis to cut production and puild inventories. The company provided the following data for the year: Machine-hours Manufacturing overhead cost Inventories at year-end: Raw materials Work in process (includes overhead applied of $37,520) Finished goods (includes overhead applied of $101,840) Cost of goods sold (includes overhead applied of $396,640) Required: 1. Compute the underapplied or overapplied overhead. 2. Assume the company closes underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry. Complete this question by…