Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 17P
PROBLEM 2−17 Plantwide and Departmental Predetermined
Wilmington Company has two manufacturing departments—Assembly and Fabrication. It considers all of its
| Estimated Data | Assembly | Fabrication | Total |
| Manufacturing overhead costs | $600,000 | $800,000 | $1,400,000 |
| Direct labor-hours | 50,000 | 30,000 | 80,000 |
| Machine-hours | 20,000 | 100,000 | 120,000 |
| Job Bravo | Assembly | Fabrication | Total |
| Direct labor-hours | 11 | 3 | 14 |
| Machine-hours | 3 | 6 | 9 |
Required:
- If Wilmington used a plantwide predetermined overhead rate based on direct labor-hours, how much manufacturing overhead would be applied to Job Bravo?
- If Wilmington uses departmental predetermined overhead rates with direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication, how much manufacturing overhead would be applied to Job Bravo?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Overhead Applied to Jobs, Departmental Overhead Rates
Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate
based on machine hours is used. Xania's plant manager has heard that departmental
overhead rates can offer significantly better cost assignments than a plantwide rate can
offer. Xania has the following data for its two departments for the coming year:
Department A Department B
$120,000
$69,000
13,500
Overhead costs (expected)
Normal activity (machine hours)
Required:
1. Compute a predetermined overhead rate for the plant a whole based on machine
hours. Round your answer to two decimal places.
6.92 ✓ per machine hour
2. Compute predetermined overhead rates for each department using machine hours.
(Note: Round to two decimal places, if necessary.)
Department A
8.89
per machine hour
5
per machine hour
3. Conceptual Connection: Job 73 used 20 machine hours from Department A and 50
machine hours from Department B. Job 74 used 50 machine hours from…
Question Content Area
Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.
Overhead
DirectLabor Hours (dlh)
Product
A
B
Painting Dept.
$248,000
10,000
dlh
16
dlh
4
dlh
Finishing Dept.
72,000
10,000
4
16
Totals
$320,000
20,000
dlh
20
dlh
20
dlh
The overhead from both production departments allocated to each unit of Product A if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is
a.$396.80 per unit
b.$214.40 per unit
c.$320.00 per unit
d.$425.60 per unit
Overhead Applied to Jobs, Departmental Overhead Rates
Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania’s plant manager has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Xania has the following data for its two departments for the coming year:
Department A
Department B
Overhead costs (expected)
$110,000
$78,000
Normal activity (machine hours)
13,500
15,800
Required:
1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. Round your answer to two decimal places.$ per machine hour
2. Compute predetermined overhead rates for each department using machine hours. (Note: Round to two decimal places, if necessary.)
Department A
$ per machine hour
Department B
$ per machine hour
3. Conceptual Connection: Job 73 used 20 machine hours from Department A and 50 machine hours from…
Chapter 2 Solutions
Managerial Accounting
Ch. 2.A - EXERCISE 2A-1 Activity-Based Absorption Costing...Ch. 2.A - EXERCISE 2A-2 Activity-Based Absorption Costing as...Ch. 2.A - EXERCISE 2A-3 Activity-Based Absorption Costing as...Ch. 2.A - PROBLEM 2A-4 Activity-Based Absorption Costing as...Ch. 2.A - Prob. 5PCh. 2.A -
CASE 2A-6 Activity-Based Absorption Costing and...Ch. 2.B - EXERCISE 2B-1 Overhead Rate Based on Capacity...Ch. 2.B - EXERCISE 2B-2 Overhead Rates and Capacity Issues...Ch. 2.B - Prob. 3PCh. 2.B - Prob. 4C
Ch. 2 - Prob. 1QCh. 2 - What is absorption costing?Ch. 2 - What is normal costing?Ch. 2 - How is the unit product cost of a job calculated?
Ch. 2 - Explain the four-step process used to compute a...Ch. 2 - What is the purpose of the job cost sheet in a...Ch. 2 - Explain why some production costs must be assigned...Ch. 2 - Why do companies use predetermined overhead rates...Ch. 2 - What factors should be considered in selecting an...Ch. 2 - If a company fully allocates all of its overhead...Ch. 2 - Would you expect the amount of applied overhead...Ch. 2 - Prob. 12QCh. 2 - What is a plantwide overhead rate? Whyare multiple...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 3AECh. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 1F15Ch. 2 - Prob. 2F15Ch. 2 - Prob. 3F15Ch. 2 - Prob. 4F15Ch. 2 - Prob. 5F15Ch. 2 - Prob. 6F15Ch. 2 - Prob. 7F15Ch. 2 - Prob. 8F15Ch. 2 - Prob. 9F15Ch. 2 - Prob. 10F15Ch. 2 - Prob. 11F15Ch. 2 - Sweeten Company had no jobs in progress at the...Ch. 2 - Prob. 13F15Ch. 2 - Prob. 14F15Ch. 2 - Prob. 15F15Ch. 2 - EXERCISE 2-1 Compute a Predetermined Overhead Rate...Ch. 2 - Prob. 2ECh. 2 - EXERCISE 2–3 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 24 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 2-5 Computing Total Job Costs and Unit...Ch. 2 - Prob. 6ECh. 2 - EXERCISE 2-7 Job-Order Costing; Working Backwards...Ch. 2 - EXERCISE 2-8 Applying Overhead Cost; Computing...Ch. 2 - EXERCISE 2–9 Job-Order Costing and Decision Making...Ch. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - EXERCISE 2—13 Departmental Predetermined Overhead...Ch. 2 - EXERCISE 214 Job-Orders Costing for a Service...Ch. 2 - Prob. 15ECh. 2 - PROBLEM 2—16 Plantwide Predetermined Overhead...Ch. 2 - PROBLEM 217 Plantwide and Departmental...Ch. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - PROBLEM 2-21 Plant wide Versus Multiple...Ch. 2 - CASE 2-22 Plantwide versus Departmental Overhead...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Applying factory overhead Bergan Company estimates that total factory overhead costs will be 620,000 for the year. Direct labor hours are estimated to be 80,000. For Bergan Company, (A) determine the predetermined factory overhead rate using direct labor hours as the activity base, (B) determine the amount of factory overhead applied to Jobs 200 and 305 in May using the data on direct labor hours from BE 16-2, and (C) prepare the journal entry to apply factory overhead to both jobs in May according to the predetermined overhead rate.arrow_forwardPREDETERMINED FACTORY OVERHEAD RATE Millerlile Enterprises calculates a predetermined factory overhead rate so that factory overhead may be applied to production during the month. It calculates the overhead using three different methods and then decides which one to use. Total estimated factory overhead costs are 540,000. Total estimated direct labor hours are 50,000. Total estimated direct labor costs are 900,000. Total machine hours are estimated to be 80,000. Calculate the predetermined overhead application rates based on (1) direct labor hours, (2) direct labor costs, and (3) machine hours.arrow_forwardPREDETERMINED FACTORY OVERHEAD RATE Marston Enterprises calculates a predetermined factory overhead rate so that factory overhead may be applied to production during the month. It calculates the overhead using three different methods and then decides which one to use. Total estimated factory overhead costs are 600,000. Total estimated direct labor hours are 30,000. Total estimated direct labor costs are 1,200,000. Total machine hours are estimated to be 200,000. Calculate the predetermined overhead application rates based on (1) direct labor hours, (2) direct labor costs, and (3) machine hours.arrow_forward
- Cost Flows Consider the following independent jobs. Overhead is applied in Department 1 at the rate of 6 per direct labor hour. Overhead is applied in Department 2 at the rate of 8 per machine hour. Direct labor wages average 10 per hour in each department. Required: Fill in the missing data for each job.arrow_forwardOverhead application rate Roll Tide Manufacturing Inc. uses a job order cost system and standard costs. It manufactures one product, whose standard cost follows: The standards are based on normal capacity of 2,700 direct labor hours. Actual activity for March follows: Required: 1. Compute the variable and fixed factory overhead rates per unit. 2. Compute the variable and fixed overhead rates per direct labor hour. 3. Determine the total fixed factory overhead based on normal capacity.arrow_forwardOverhead application rate Creole Manufacturing Inc. uses a job order cost system and standard costs. It manufactures one product, whose standard cost follows: The standards are based on normal capacity of 2,400 direct labor hours. Actual activity for October follows: Required: 1. Compute the variable and fixed factory overhead rates per unit. 2. Compute the variable and fixed overhead rates per direct labor hour. 3. Determine the total fixed factory overhead based on normal capacity.arrow_forward
- Determining job costcalculation of predetermined rate for applying overhead by direct labor cost and direct labor hour methods Beemer Products Inc. has its factory divided into three departments, with individual factory overhead rates for each department. In each department, all the operations are sufficiently alike for the department to be regarded as a cost center. The estimated monthly factory overhead for the departments is as follows: Forming, 64,000; Shaping, 36,000; and Finishing, 10,080. The estimated production data include the following: The job cost ledger shows the following data for X6, which was completed during the month: Required: Determine the cost of X6. Assume that the factory overhead is applied to production orders, based on the following: 1. Direct labor cost 2. Direct labor hours (Hint: You must first determine overhead rates for each department, rounding rates to the nearest cent.)arrow_forwardQuestion Content Area Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours. Overhead DirectLabor Hours (dlh) Product A B Painting Dept. $249,100 9,400 dlh 7 dlh 11 dlh Finishing Dept. 69,400 10,900 2 8 Totals $318,500 20,300 dlh 9 dlh 19 dlh Using a single plantwide rate, the factory overhead allocated per unit of Product B is a.$141.21 b.$298.11 c.$185.50 d.$15.69arrow_forward2021.12.0203:13 Cost Accounting CHAPTER 238 Cost Accounting Chapter 8 Accounting for Factory Overhead Problem 4 The Ellery Corporation uses the job order coșt system of accounting. Shown below is a list of the jobs completed during the month of March showing the charges for materials requisitioned and for direct labor cost. Problem 6 The ABC Company has two service departments and two producing departments Job 123 Material Cost P 300 1,080 Service Departments' to costs: Department 1 - Repair Department 2 - Cafeteria P 14,000 11,000 Direct labor P 600 124 940 1,400 5,120 Próducing Departments' Factory OH Costs Department A - Machinery Department B - Assembly 52,500 48,000 125 720 126 4,200 Required: Assuming that factory overhead is applied on the basis of direct labor costs and that the predetermined rate is 180%, compute: 1. The amount of overhead to be added to the cost of each job completed 2. The total cost of each job completed during the month. Additional information Square Feet…arrow_forward
- Question No.7 Lyon Corporation has identified the following overhead costs and activity drivers for next year: Overhead Items Expected Costs Activity Drivers Expected Qty. Set-up costs Ordering costs Maintenance Power Rs.150,000 40,000 200,000 20,000 Number of set-ups Number of orders Machine hours Kilowatt hours 1,000 10,000 16,000 100,000 The following are two of the jobs completed during the year: Job XX Job YY Direct materials Rs.2,250 Rs.2,500 Direct labor Rs.3,000 Rs.1875 Units complete 375 300 Direct labor hours 90 110 Number of set-ups 6 8 Number of orders 8…arrow_forwardPROBLEM I ABC Company's total overhead costs at various levels of activity are presented below: March April May June. Machine Hours Total Overhead Costs $216,800 $194,000 $239,600 $262,400 60,000 50,000 70,000 80,000 Assume that the overhead costs above consist of utilities, supervisory salaries, and maintenance. At the 50,000 machine-hour level of activity these costs are: Utilities (V). Supervisory salaries (F). Maintenance (M).. Total overhead cost V = Variable; F = Fixed; M = Mixed The company wants to break down the maintenance cost into its basic variable and fixed cost elements. Required: $ 54,000 62,000 78.000 $194.000 a. Estimate the maintenance cost for June. b. Use the high-low method to estimate the cost formula for maintenance cost. c. Estimate the total overhead cost at an activity level of 55,000 machine hours.arrow_forwardReview 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_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cost Classifications - Managerial Accounting- Fixed Costs Variable Costs Direct & Indirect Costs; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=QQd1_gEF1yM;License: Standard Youtube License