Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 13, Problem 13.2ME
Mini-Exercise 13.2
LO 5, 6
Calculate predetermined
Required:
Calculate Bentley’s predetermined overhead rate and cost per unit of production for 2016.
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Discussion Question
Epsilon Manufacturing Company uses a predetermined manufacturing overhead rate based on a
percentage of direct labor cost. At the beginning of 2018, they estimated total manufacturing
overhead costs at $1,015,000, and they estimated total direct labor costs at $1,400,00o.
The administration and selling overheads are to be absorbed in each job cost at 15% of production
cost. Distribution cost should be added to each job according to quotes from outside carriage
companies.
The
company
wishes to quote for job # W5oo. Data for the job are as follows:
Direct materials cost
$169,450
Direct labour cost
$230,000
Direct labour hours
400 hours
Special Design Cost
Distribution quote from haulage company
Units of product produced
$12,300
$17,930
250 crates
a) Compute Epsilon Manufacturing Company predetermined manufacturing overhead rate for
2018.
b) How much manufacturing overhead was allocated to Job #W5o0?
c) Calculate the total cost & quotation price of Job #W500, given…
Test yourself
ABC Company is producing
three products, A, B and C in Direct labor hours
their unit.
A
C
10,000
15,000
25,000
Number of orders
15
25
10
placed
During the year 2019,the
total overhead expenses
Machine set up hours
150
300
50
are;
Requirement
1. Calculated pre-determined overhead rate if overhead is
applied based on the direct labor hours
Procurement cost RO200,000
Machine set up cost RO100,000
2. Compute overhead rates using activity based costing.
3. Determine the difference in the amount of overhead
allocated to each product between the two methods.
Approximately Relevant ABC
Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year:
Activity
Expected Cost
Activity Driver
Activity Capacity
Setting up equipment
$144,000
Number of setups
120
Ordering materials
14,400
Number of orders
900
Machining
103,950
Machine hours
9,450
Receiving
22,770
Receiving hours
1,035
Silven produces two models of cell phones with the following expected activity demands:
Model X
Model Y
Units completed
5,600
11,200
Number of setups
80
40
Number of orders
300
600
Machine hours
5,400
4,050
Receiving hours
345
690
Required:
1. Determine the total overhead assigned to each product using the four activity drivers.
Total Overhead Assigned
Model X
$fill in the blank 1
Model Y
$fill in the blank 2
2. Determine the total overhead assigned to each model using…
Chapter 13 Solutions
Accounting: What the Numbers Mean
Ch. 13 - Prob. 13.1MECh. 13 - Mini-Exercise 13.2 LO 5, 6 Calculate predetermined...Ch. 13 - Mini-Exercise 13.3 LO 6 Underapplied overhead...Ch. 13 - Mini-Exercise 13.4 LO 7 Statement of cost of goods...Ch. 13 - Prob. 13.5MECh. 13 - Prob. 13.6MECh. 13 - Exercise 13.7 LO 2 Value chain classifications...Ch. 13 - Prob. 13.8ECh. 13 - Exercise 13.9 LO 3, 4 Cost classifications For...Ch. 13 - Exercise 13.10
LO 3, 4
Cost classifications For...
Ch. 13 - Exercise 13.11
LO 4
Cost classifications Aussie...Ch. 13 - Exercise 13.12
LO 4
Cost classifications College...Ch. 13 - Exercise 13.13
LO 5
Product costing—various issues...Ch. 13 - Exercise 13.14
LO 5
Product costing—manufacturing...Ch. 13 - Exercise 13.15
LO 5, 6
Manufacturing...Ch. 13 - Exercise 13.16 LO 5, 6 Manufacturing...Ch. 13 - Prob. 13.17ECh. 13 - Prob. 13.18ECh. 13 - Prob. 13.19ECh. 13 - Exercise 13.20
LO 8
Variable versus absorption...Ch. 13 - Problem 13.21
LO 9
Activity-based costing MedTech,...Ch. 13 - Prob. 13.22PCh. 13 - Prob. 13.23PCh. 13 - Prob. 13.24PCh. 13 - Prob. 13.25PCh. 13 - Prob. 13.26PCh. 13 - Prob. 13.27PCh. 13 - Prob. 13.28PCh. 13 - Case 13.29 LO 4, 5, 7 Cost of goods manufactured,...Ch. 13 - Prob. 13.30CCh. 13 - Prob. 13.31CCh. 13 - Prob. 13.32C
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- Discussion Question Epsilon Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2018, they estimated total manufacturing overhead costs at $1,015,000, and they estimated total direct labor costs at $1,400,000. The administration and selling overheads are to be absorbed in each job cost at 15% of production cost. Distribution cost should be added to each job according to quotes from outside carriage companies. The company wishes to quote for job # W500. Data for the job are as follows: Direct materials cost $169,450Direct labour cost $230,000Direct labour hours 400 hoursSpecial Design Cost $12,300Distribution quote from haulage company $17,930Units of product produced 250 crates a) Compute Epsilon Manufacturing Company predetermined manufacturing overhead rate for 2018.b) How much manufacturing overhead was allocated to Job #W500?c) Calculate the total cost & quotation price of Job #W500, given that a…arrow_forwardApproximately Relevant ABC Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $147,000 Number of setups 120 Ordering materials 12,000 Number of orders 600 Machining 109,200 Machine hours 9,100 Receiving 31,680 Receiving hours 1,320 Silven produces two models of cell phones with the following expected activity demands: Model X Model Y Units completed 4,200 8,400 Number of setups 80 40 Number of orders 200 400 Machine hours 5,200 3,900 Receiving hours 440 880 REQUIRED:- 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. Round interim…arrow_forwardTest yourself ABC Company is producing three products, A, B and C in Direct labor hours their unit. A В C 10,000 15,000 25,000 Number of orders 15 25 10 placed During the year 2019,the total overhead expenses Machine set up hours 150 300 50 are; Requirement 1. Calculated pre-determined overhead rate if overhead is applied based on the direct labor hours .Compute overhead rates using activity based costing. Determine the difference in the amount of overhead allocated to each Procurement cost RO200,000 Machine set up cost RO100,000 product between the two methods.arrow_forward
- Approximately Relevant ABC Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $132,000 Number of setups 120 Ordering materials 19,800 Number of orders 900 Machining 115,500 Machine hours 10,500 Receiving 26,400 Receiving hours 1,200 Silven produces two models of cell phones with the following expected activity demands: Model X Model Y Units completed 4,000 8,000 Number of setups 80 40 Number of orders 300 600 Machine hours 6,000 4,500 Receiving hours 400 800 Required: 1. Determine the total overhead assigned to each product using the four activity drivers. Total Overhead Assigned Model X Model Y 2. Determine the total overhead assigned to each model using the two most expensive activities. The…arrow_forwardProblem 1 The Denmark Company estimates its factory overhead for the next period at P 425,000. It is estimated that 500.000 units will be produced at a materials cost of P 1,000,000 and will require 250.000 direct labor hours at an estimated cost of P1,062,500. The machines will run about l100,000 hours. Required: The predetermined factorv overhead rate based on: 1. Material cost 2. Units of production 3. Machine hours 4. Direct labor cost 5. Direct labor hours Cs Scanned with CamScannerarrow_forwardPredetermined overhead rates and manufacturing overhead application (LO 4) Rector Company manufactures a line of lightweight running shoes. CEO Mark Rector estimated that the company would incur $2,500,000 in manufacturing overhead during the coming year. Additionally, he estimated the company would operate at a level requiring 250,000 direct labor hours and 400,000 machine hours. Required a.Assume that Rector Company uses direct labor hours as its manufacturing overhead application base. Calculate the company's predetermined overhead rate. bAssume that job 4375 required 300 direct labor hours to complete. How much manufacturing overhead should be applied to the job? cAssume that Rector Company uses machine hours as its manufacturing overhead application base. Calculate the company's predetermined overhead rate. dAssume that job 4375 required 140 machine hours to complete. How much manufacturing overhead should be applied to the job?arrow_forward
- Review Question 1Manufacturing Overhead Allocation Base and Calculating the Cost of Jobs.Pyramid Company expects to incur $3,000,000 in manufacturing overhead costs this year. During theyear, it expects to use 40,000 direct labor hours at a cost of $600,000 and 80,000 machine hours.Required:a. Prepare a predetermined overhead rate based on direct labor hours, direct labor cost, andmachine hours.b. Why might Pyramid Company prefer to use machine hours to allocate manufacturing overhead?c. Using each of the predetermined overhead rates calculated in part a and the data that follows forjob 128, determine the cost of job128.Direct materials $6,000Direct labor $4,000 (200 hours at $15 per hour) + (100 hours at $10 per hour)Machine time 700 hoursarrow_forwardQuestion Content Area Thomlin Company forecasts that total factory overhead for the current year will be $14,529,000 with 167,000 total machine hours. Year to date, the actual overhead is $8,001,000, and the actual machine hours are 88,900 hours. If Thomlin Company uses a predetermined factory overhead rate based on machine hours for applying overhead, as of this point in time (year to date), the overhead is a. $234,300 underapplied b. $234,300 overapplied c. $266,700 overapplied d. $266,700 underappliedarrow_forwardExercise #1 The following information is estimated by Blue Sea Ltd’s accountant for the upcoming financial year: Sales revenue 3,480,000 Machine hours 54,000 Direct labour hours 81,000 Direct labour rate $22.00 Manufacturing overhead 1,326,000 Required: Calculate the predetermined overhead rates assuming that the cost driver is: Direct labour hours Direct labour costs Machine hoursarrow_forward
- Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hoursarrow_forwardGreen Bay Cheese Company estimates its overhead to be $375,000. It expects to have 125,000 direct labor hours costing $1,500,000 in labor and utilizing 15,000 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hoursarrow_forwardWhen setting its predetermined overhead application rate. Tasty Turtle estimated its overhead would be $75,000 and manufacturing would require 25,000 machine hours in the next year. At the end of the year, it found that actual overhead was $74,000 and manufacturing required 24,000 machine hours. Determine the predetermined overhead rate. What is the overhead applied during the year? Prepare the journal entry to eliminate the under- or over applied overhead.arrow_forward
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