Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 36P
The following selected data were taken from the accounting records of Metcalf Manufacturing. The company uses direct-labor hours as its cost driver for overhead costs.
March’s costs consisted of machine supplies ($102,000), depreciation ($15,000), and plant maintenance ($469,000). These costs exhibit the following respective behavior: variable, fixed, and semivariable.
The manufacturing overhead figures presented in the preceding table do not include Metcalf’s supervisory labor cost, which is step-fixed in nature. For volume levels of less than 15,000 hours, supervisory labor amounts to $45,000. The cost is $90,000 from 15,000–29,999 hours and $135,000 when activity reaches 30,000 hours or more.
Required:
- 1. Determine the machine supplies cost and depreciation for January.
- 2. Using the high-low method, analyze Metcalf’s plant maintenance cost and calculate the monthly fixed portion and the variable cost per direct-labor hour.
- 3. Assume that present cost behavior patterns continue into the latter half of the year. Estimate the total amount of manufacturing overhead the company can expect in November if 29,500 direct-labor hours are worked.
- 4. Briefly explain the difference between a fixed cost and a step-fixed cost.
- 5. Assume that a company has a step-fixed cost. Generally speaking, where on a step should the firm attempt to operate if it desires to achieve a maximum
return on its investment ?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Hamilton Company applies manufacturing overhead costs to products based on direct labor hours. The company estimates manufacturing overhead cost for the year to be $252,000 and direct labor hours to be 20,000. Actual overhead and actual direct labor hours for the year were $265,000 and 22,200 hours, respectively.
1. Compute over- or underapplied overhead.
2a. Which accounts will be affected by the over- or underapplied manufacturing overhead?
2b. Will the accounts be increased or decreased to adjust for the over- or underapplied manufacturing overhead?
Hamilton Company applies manufacturing overhead costs to products based on direct labor hours. The company estimates
manufacturing overhead cost for the year to be $252,000 and direct labor hours to be 20,000. Actual overhead and actual
direct labor hours for the year were $265,000 and 22,200 hours, respectively.
Required:
1. Compute over- or underapplied overhead.
2a. Which accounts will be affected by the over- or underapplied manufacturing overhead?
2b. Will the accounts be increased or decreased to adjust for the over- or underapplied manufacturing overhead?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Req 2B
Compute over- or underapplied overhead.
Note: Do not round your intermediate calculations.
Manufacturing overhead
SEP
Next >
ST
AO
Hamilton Company applies manufacturing overhead costs to products based on direct labor hours. The company estimates manufacturing overhead cost for the year to be $252,000 and direct labor hours to be 20,000. Actual overhead and actual direct labor hours for the year were $265,000 and 22,200 hours, respectively.
Required:
1. Compute over- or underapplied overhead.
2a. Which accounts will be affected by the over- or underapplied manufacturing overhead?
2b. Will the accounts be increased or decreased to adjust for the over- or underapplied manufacturing overhead?
Chapter 6 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 6 - Describe the importance of cost behavior patterns...Ch. 6 - Define the following terms, and explain the...Ch. 6 - Suggest an appropriate activity base (or cost...Ch. 6 - Draw a simple graph of each of the following types...Ch. 6 - Explain the impact of an increase in the level of...Ch. 6 - Explain why a manufacturers cost of supervising...Ch. 6 - Explain the impact of an increase in the level of...Ch. 6 - Prob. 8RQCh. 6 - Indicate which of the following descriptions is...Ch. 6 - Prob. 10RQ
Ch. 6 - What is meant by a learning curve? Explain its...Ch. 6 - Suggest an appropriate independent variable to use...Ch. 6 - What is an outlier? List some possible causes of...Ch. 6 - Explain the cost estimation problem caused by...Ch. 6 - Describe the visual-fit method of cost estimation....Ch. 6 - What is the chief drawback of the high-low method...Ch. 6 - Explain the meaning of the term least squares in...Ch. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - List several possible cost drivers that could be...Ch. 6 - Prob. 21RQCh. 6 - Prob. 22ECh. 6 - The behavior of the annual maintenance and repair...Ch. 6 - WMEJ is an independent television station run by a...Ch. 6 - Jonathan Macintosh is a highly successful...Ch. 6 - Jonathan Macintosh is a highly successful...Ch. 6 - The Iowa City Veterinary Laboratory performs a...Ch. 6 - Chillicothe Meat Company produces one of the best...Ch. 6 - Rio Bus Tours has incurred the following bus...Ch. 6 - Prob. 31ECh. 6 - Prob. 32ECh. 6 - Prob. 33ECh. 6 - Gator Beach Marts, a chain of convenience grocery...Ch. 6 - For each of the cost items described below, choose...Ch. 6 - The following selected data were taken from the...Ch. 6 - Antioch Extraction, which mines ore in Montana,...Ch. 6 - Nations Capital Fitness, Inc. operates a chain of...Ch. 6 - The Allegheny School of Music has hired you as a...Ch. 6 - Prob. 40PCh. 6 - (Note: Instructors who wish to cover all three...Ch. 6 - Refer to the original data in the preceding...Ch. 6 - Shortly after being hired as an analyst with...Ch. 6 - The controller of Chittenango Chain Company...Ch. 6 - Dana Rand owns a catering company that prepares...Ch. 6 - Prob. 48PCh. 6 - Earth and Artistry, Inc. provides commercial...Ch. 6 - Prob. 51CCh. 6 - Refer to the data and accompanying information in...
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
- A company has the following information relating to its production costs: Compute the actual and applied overhead using the companys predetermined overhead rate of $23.92 per machine hour. Was the overhead over applied or under applied, and by how much?arrow_forwardCushing, Inc., costs products using a normal costing system. The following data are available for last year: Overhead is applied on the basis of direct labor hours. What was last years per unit product cost? a. 1.39 b. 4.40 c. 4.43 d. 3.01arrow_forwardThe following selected data were taken from the accounting records of Metcalf Manufacturing. The company uses direct-labor hours as its cost driver for overhead costs. Month January February March April May June Direct-Labor Hours 37,000 39,000 52,000 40,000 44,000 42,000 March's costs consisted of machine supplies ($296,400), depreciation ($32,500), and plant maintenance ($570,100). These costs exhibit the following respective behavior: variable, fixed, and semivariable. Manufacturing Overhead $701,000 740,000 899,000 754, 250 805,500 802,500 The manufacturing overhead figures presented in the preceding table do not include Metcalf's supervisory labor cost, which is step- fixed in nature. For volume levels of less than 15,000 hours, supervisory labor amounts to $77,500. The cost is $155,000 from 15,000- 29,999 hours and $232,500 when activity reaches 30,000 hours or more. Required: 4. 1. Determine the machine supplies cost and depreciation for January. 2. Using the high-low method,…arrow_forward
- Hamilton Company applies manufacturing overhead costs to products based on direct labor hours. The company estimates manufacturing overhead cost for the year to be $252,000 and direct labor hours to be 20,000. Actual overhead and actual direct labor hours for the year were $265,000 and 22,200 hours, respectively. Required: 1. Compute over- or underapplied overhead. 2a. Which accounts will be affected by the over- or underapplied manufacturing overhead? 2b. Will the accounts be increased or decreased to adjust for the over- or underapplied manufacturing overhead? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Compute over- or underapplied overhead. Note: Do not round your intermediate calculations. Manufacturing overhead 89 Req 2B SEP 17 Req 1 Next > NT A O Parrow_forwardBlue Mountain Company applies overhead on the basis of machine hours. The following data was for the recent year: Estimated annual overhead cost $3000000 Actual annual overhead cost $2970000 Estimated machine hours 300000 Actual machine hours 295000 a) Calculate the appliedoverheadcostfor the year. b) Calculate the under-or overapplication of overhead for the year. c) Explain the reason for the difference in applied overhead costs and actual overhead costs, and how this difference is addressed at year-end.arrow_forwardHamilton Company applies manufacturing overhead costs to products based on direct labor hours. The company estimates manufacturing overhead cost for the year to be $276,000 and direct labor hours to be 20,000. Actual overhead and actual direct labor hours for the year were $325,000 and 24,600 hours, respectively. Required: 1. Compute over- or underapplied overhead. 20. Which accounts will be affected by the over- or underapplied manufacturing overhead? 2b. Will the accounts be increased or decreased to adjust for the over- or underapplied manufacturing overhead? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Compute over- or underapplied overhead. Manufacturing overhead Req 1 Req 2A Req 28 Which accounts will be affected by the over- or underapplied manufacturing overhead? (Select all that apply.) Cost of Goods Sold Manufacturing Overhead Finished Goods Inventory Selling and Administrative Overhead Marketing and Distribution Overhead Req 1 Req 2A…arrow_forward
- Osborn Manufacturing uses a predetermined overhead rate of $19.70 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $265,950 of total manufacturing overhead for an estimated activity level of 13,500 direct labor-hours. The company actually incurred $260,000 of manufacturing overhead and 13,000 direct labor-hours during the period. Can you please help me with the following: Determine the amount of underapplied or overapplied manufacturing overhead for the period, then assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin? By how much?arrow_forwardMac Manufacturing uses a predetermined overhead rate of P19.10 per direct labor hour. This predetermined rate was based on a cost formula that estimates P246,390 of total manufacturing overhead for an estimated activity level of 12,900 direct labor-hours. The company incurred actual total manufacturing overhead costs of P245,000 and 12,400 total direct labor-hours during the period. Required: Determine the amount of underapplied or overapplied overhead for the period.arrow_forwardThe following information relates to Dela Cruz Company for last year. Dela Cruz uses direct labor hours as an overhead base. (a) Estimated direct labor hours 150,240 hours. (b) Estimated manufacturing overhead costs P112,680. (c) Actual manufacturing overhead costs P136,906. (d) Applied manufacturing overhead costs P126,765. What was the actual direct labor hours worked last year at Dela Cruz?arrow_forward
- Kareem Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period: Estimated annual overhead cost OMR 1,600,000 Actual annual overhead cost OMR 1,575,000 Estimated machine hours 400,000 Estimated Labor hours 200,000 Actual Labor hours 150,000 Actual machine hours 390,000arrow_forwardOsborn Manufacturing uses a predetermined overhead rate of $19.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $272,630 of total manufacturing overhead for an estimated activity level of 13,700 direct labor-hours. The company actually incurred $270,000 of manufacturing overhead and 13,200 direct labor-hours during the period. Required: 1. Calculate the underapplied or overapplied manufacturing overhead. 2. Assume the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the closing journal entry increase or decrease gross margin? By how much? 1. Manufacturing overhead 2. The gross margin would by byarrow_forwardSelected cost data for Aerial Co for the year are as follows: Estimated overhead cost for the year Estimated direct labor cost for the year Actual manufacturing overhead cost for the year Actual direct labor cost for the year Aerial Co uses direct labor to apply overhead to jobs. What is the over or under applied overhead for this year? Do not round the predetermined rate -- only round the last computation. Enter over applied as a positive amount and under applied as a negative amount. Round to the nearest whole number, omit commas and dollar signs. Your Answer: $ 150,000 $ 81,000 $ 164,000 $ 76,000 1 Answerarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY