Concept explainers
The following information, taken from the books of Herman Brothers Manufacturing represents the operations for January:
The
The following actual information was accumulated during February:
Required:
- 1. Using the January data, ascertain the predetermined factory
overhead rates to be used during February, based on the following:- a. Direct labor cost
- b. Direct labor hours
- c. Machine hours
- 2. Prepare a schedule showing the total production cost of Job M45 under each method of applying factory overhead.
- 3. Prepare the entries to record the following for February operations:
- a. The liability for total factory overhead.
- b. Distribution of factory overhead to the departments.
- c. Application of factory overhead to the work in process in each department, using direct labor hours. (Use the predetermined rate calculated in Requirement 1.)
- d. Closing of the applied factory overhead accounts.
- e. Recording under- and overapplied factory overhead and closing the actual factory overhead accounts.
1.
Ascertain the predetermined factory overhead rates to be used during February, based on the following:
- a. Direct labor cost
- b. Direct labor hours
- c. Machine hours
Explanation of Solution
- a. Compute the predetermined rate using direct labor cost:
- b. Compute the predetermined rate using direct labor hour rate:
- c. Compute the predetermined rate using machine hour rate:
2.
Prepare a schedule showing the total production cost of Job M45 under each method of applying factory overhead.
Explanation of Solution
Prepare a schedule showing the total production cost of Job M45 under each method of applying factory overhead:
Cost of Production | ||||
Job M45—Direct Labor Cost Method | Bronzing | Casting | Finishing | Total |
Materials | $ 20.00 | $ 40.00 | $ 20.00 | $ 80.00 |
Direct labor cost | 64 | 60 | 54 | 178 |
Factory overhead: | ||||
160 | ||||
120 | ||||
97.2 | ||||
Total | 377.2 | |||
Total production cost | $ 244.00 | $ 220.00 | $ 171.20 | $ 635.20 |
Table (1)
Cost of Production | ||||
Job M45—Direct Labor Hour Method | Bronzing | Casting | Finishing | Total |
Materials | $ 20 | $ 40 | $ 20 | $ 80 |
Direct labor cost | 64 | 60 | 54 | 178 |
Factory overhead: | ||||
160 | ||||
120 | ||||
60 | ||||
Total | 340 | |||
Total production cost | $ 244 | $ 220 | $ 134 | $598 |
Table (2)
Cost of Production | ||||
Job M45—Machine Hour Method | Bronzing | Casting | Finishing | Total |
Materials | $ 20 | $ 40 | $ 20 | $ 80 |
Direct labor cost | 64 | 60 | 54 | 178 |
Factory overhead: | ||||
10 | ||||
6 | ||||
8 | ||||
Total | 24 | |||
Total production cost | $94 | $106 | $82 | $282 |
Table (3)
3.
Prepare journal entries to record the given transaction for February operations.
Explanation of Solution
Prepare journal entries to record the given transaction for February operations:
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
a. | Factory Overhead | 89,500 | ||
Accounts Payable | 89,500 | |||
(To record the Factory Overhead) | ||||
b. | Factory Overhead-Bronzing | 35,000 | ||
Factory Overhead-Casting | 22,000 | |||
Factory Overhead-Finishing | 32,500 | |||
Factory Overhead | 89,500 | |||
(To record the distribution of total factory overhead cost to other departments.) | ||||
c. | Work in Process | 69,600 | ||
Applied Factory Overhead- Bronzing | 30,000 | |||
Applied Factory Overhead- Casting | 19,600 | |||
Applied Factory Overhead- Finishing | 20,000 | |||
(To record the work in process) | ||||
d. | Applied Factory Overhead- Bronzing | 30,000 | ||
Applied Factory Overhead- Casting | 19,600 | |||
Applied Factory Overhead- Finishing | 20,000 | |||
Factory Overhead-Bronzing | 30,000 | |||
Factory Overhead-Casting | 19,600 | |||
Factory Overhead-Finishing | 20,000 | |||
(To record the applied factory overhead) | ||||
e | Under- and Over applied Overhead | 19,900 | ||
Factory Overhead-Bronzing | 5,000 | |||
Factory Overhead-Casting | 2,400 | |||
Factory Overhead-Finishing | 12,500 | |||
(To record the Under- and Over applied overhead) |
Table (4)
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Chapter 4 Solutions
Principles of Cost Accounting
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