Cost Management
Cost Management
8th Edition
ISBN: 9781259917028
Author: BLOCHER, Edward
Publisher: Mcgraw-hill Education,
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Chapter 4, Problem 43P

1.

To determine

Calculate predetermined factory overhead rate.

1.

Expert Solution
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Explanation of Solution

Predetermined factory overhead rate: Factory overhead cost are applied or allocated to cost of job based on predetermined factory overhead rate.

Cost of goods sold: Cost of goods sold is the total of all the expenses incurred by a company to sell the goods during the given period.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Calculate predetermined factory overhead rate.

Predetermined overhead rate=Budgeted factory overheadDirect labor hour=$455,600033,500=$13.60 per direct labor hour

Therefore, predetermined factory overhead rate is $13.60 per direct labor hour.

2.

To determine

Prepare journal entries.

2.

Expert Solution
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Explanation of Solution

Prepare journal entries.

DateDescriptionPost RefDebit ($)Credit($)
a.Factory overhead 1,800 
 Prepaid insurance  1,800
 (To record prepaid insurance)   
     
b.Selling & administrative expense 1,025 
 Accumulated depreciation  1,025
 (To record depreciation on administrative asset)   
     
c.Material inventory 336 
 Accounts payable (1)  336
 (To record purchase of polishing materials)   
     
d.Factory overhead 6,510 
 Cash  6,510
 (To record payment factory utility )   
     
e.Work-in-process inventory 140,000 
 Factory overhead 20,000 
 Cash  160,000
 (To record payment factory utility )   
     
f.Factory overhead 6,270 
 Cash  6,270
 (To record payment factory overhead)   
     
g.Material inventory 24,500 
 Accounts payable  24,500
 (To record purchase of unpolished semi-precious stones and gold)   
     
h.Work-in-process inventory 18,500 
 Factory overhead 1,600 
 Material inventory  20,100
 (To record requisition of direct materials)   
     
i.Selling & administrative expense 5,660 
 Cash  5,660
 (To record incurred miscellaneous selling and administrative expenses)   
     
j.Factory overhead 3,505 
 Accumulated depreciation  3,505
 (To record depreciation on manufacturing equipment)   
     
k.Advertising expense 2,650 
 Cash  2,650
 (To record advertising expense)   
     
l.Work-in-process 40,800 
 Factory overhead (2)  40,800
 (To record factory overhead)   
     
m.Finished goods inventory 64,000 
 Work-in-process inventory  64,000
 (To record finished goods)   
     
n.Accounts receivable 56,410 
 Sales revenue  56,410
 (To record sales)   
     
n.Cost of goods sold 47,860 
 Finished goods inventory  47,860
 (To record cost of goods sold)   

Table (1)

Working Notes (1): Calculate the accounts payable.

Accounts Payable=(Indirect material cost×(Purchase of high-gradepolishing materials))=$16×21=$336

(2) Calculate the factory overhead.

Factory overhead=(Predetermined overhead rate×Direct labor hour(3))=$13.60×3,000=$40,800

(3) Calculate the direct labor.

Direct labor hour=(Total hoursIndirect hours)=4,0001,000=3,000

3.

To determine

Compute the amount of overapplied or underapplied overhead.

3.

Expert Solution
Check Mark

Explanation of Solution

Compute the actual overhead.

Actual overhead=($1,800+$6,510+$20,000$6,270+$1,600+$3,505)=$39,685

Compute the amount of overapplied or underapplied overhead.

Overapplied overhead=(Applied overheadActual overhead)=$40,800$39,685=$1,115

Therefore, the amount of overapplied or underapplied overhead is $1,115.

4.

To determine

Prepare a schedule of cost of goods sold cost of goods manufactured.

4.

Expert Solution
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Explanation of Solution

Prepare a schedule of cost of goods manufactured.

H Company
Statement of Cost of Goods Manufactured
For the Month End July 31.
ParticularsAmount ($)
Direct materials used18,500
Direct labor140,000
Factory overhead applied40,800
Total current manufacturing costs199,300
Add: Beginning work-in-process inventory-
Total manufacturing cost to account for199,300
Less: Ending work-in-process inventory (4)135,300
Cost of goods manufactured64,000

Table (2)

(4) Calculate the ending work-in-process inventory.

(Ending work-in-process inventory)=(Total manufacturing costCost of goods manufactured)=$199,300$64,000=135,300

Compute the actual overhead.

ParticularsAmount ($)
Indirect materials used1,600
Factory utilities6,510
Factory insurance1,800
Depreciation expense-plant3,505
Other factory overhead6,270
Indirect labor20,000
Total factory overhead39,685
Total applied overhead40,800
Overapplied overhead1,115

Table (3)

Prepare the schedule of cost of goods sold.

H Company
Statement of Cost of Goods Sold
For the Month Ended July 31.
ParticularsAmount ($)
Finished goods beginning balance 
Cost of goods manufactured64,000
Total goods available for sale64,000
Finished goods ending balance16,140
Cost of goods sold47,860
Overapplied overhead1,115
Cost of goods sold48,975

Table (4)

5.

To determine

Prepare income statement.

5.

Expert Solution
Check Mark

Explanation of Solution

Prepare income statement.

D Company
Income Statement
For the Month Ended July 31.
ParticularsAmount ($)Amount ($)
Sales revenue 56,410
Cost of goods sold 46,745
Gross margin 9,665
Advertising expense2,650 
Selling and administrative6,685 
Total Selling and administrative 9,335
Operating income 330

Table (5)

Therefore, the operating income is $330.

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Chapter 4 Solutions

Cost Management

Ch. 4 - Prob. 11QCh. 4 - Prob. 12QCh. 4 - Explain why overhead might be overapplied in a...Ch. 4 - Prob. 14QCh. 4 - Prob. 15QCh. 4 - Prob. 16QCh. 4 - Prob. 17QCh. 4 - A small consulting firm has an overhead rate of...Ch. 4 - Prob. 19BECh. 4 - Prob. 20BECh. 4 - Some firms pool overhead into a single plantwide...Ch. 4 - Assume the following for White Top Inc. for the...Ch. 4 - Assume the following for Round Top Inc. for the...Ch. 4 - Prob. 24BECh. 4 - Prob. 25BECh. 4 - Prob. 26BECh. 4 - Prob. 27BECh. 4 - Prob. 28BECh. 4 - Erkens Company uses a job costing system with...Ch. 4 - Application of Overhead Alles Company uses a job...Ch. 4 - Job Costing Johnson Inc. is a job-order...Ch. 4 - Application of Overhead Whitley Construction...Ch. 4 - Application of Overhead Tomek Company uses a job...Ch. 4 - Application of Overhead Norton Associates is an...Ch. 4 - Application of Overhead Progressive Painting...Ch. 4 - Spoilage and Scrap (Appendix) Lexan Textile...Ch. 4 - Plantwide vs. Departmental Overhead Rate Rose Bach...Ch. 4 - Prob. 41PCh. 4 - Cost Flows and Application of...Ch. 4 - Prob. 43PCh. 4 - Application of Overhead The following information...Ch. 4 - Application of Overhead The following information...Ch. 4 - Prob. 46PCh. 4 - Application of Overhead The Meyers CPA firm has...Ch. 4 - Job Cost; Cost Flows; Application of Overhead;...Ch. 4 - Prob. 49PCh. 4 - Application of Overhead; Ethics Aero Systems is a...Ch. 4 - Operation Costing Brian Canning Co., which sells...Ch. 4 - Spoilage, Rework, and Scrap (Appendix) Richport...
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