Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter C, Problem 1SP
SP 1 This serial problem began in Chapter 1 and continues through most of the book. If previous chapter segments were 110t completed, the serial problem can begin at this point.
SPC After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze
Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 6.15.
Required
- 1. What is the total cost of Job 6.15 if Business Solutions applies overhead at 50% of direct labor cost?
- 2. What is the total cost of Job 6.15 if Business Solutions uses activity-based costing?
- 3. Which approach to assigning overhead gives a better representation of the costs incurred to produce Job 6.15? Explain.
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QUESTION 1C (TOPIC 3)
North Network Sdn Bhd (NNSB) makes custom made furniture from quality woods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. Currently, NNSB uses a plantwide overhead rate based on direct labor costs in estimating the company manufacturing overhead. The following estimated data have been made by NNSB at the beginning of the year 2018:
Department
Costs
Designing
Machining
Furnishing
Direct labor hours
30,000
60,000
40,000
Machine hours
20,000
40,000
30,000
Direct labor costs
RM150,000
RM100,000
RM200,000
Direct materials costs
RM190,000
RM400,000
RM250,000
Manufacturing overhead costs
RM270,000
RM400,000
RM50,000
Job 118 was started on 1 January 2018 and completed on 28 February 2018. NNSB’s cost records shown the following information on the Job 118:
Department
Costs
Designing
Machining…
Using job order costing in a service company
Chance Realtors, a real estate consulting firm, specializes in advising companies on potential new plant sites. The company uses a job order costing system with a predetermined overhead allocation rate, computed as a percentage of direct labor costs.
At the beginning of 2018, managing partner Andrew Chance prepared the following budget for the year:
Maynard Manufacturing, Inc. is inviting several consultants to bid for work. Andrew Chance wants to submit a bid. He estimates that this job will require about 180 direct labor hours.
Requirements
Compute Chance Realtors’ (a) hourly direct labor cost rate and predetermined overhead allocation rate.
Compute the predicted cost of the Maynard Manufacturing job.
If Chance wants to earn a profit that equals 25% of the job’s cost, how much should he bid for the Maynard Manufacturing job?
Part 3: Activity-Based Costing
Similarly, Mr. Suncat has a couple of questions for you regarding the activity-based costing method. He has
provided the following additional information:
Cost
Pools
Initial customer
meeting
Purchasing
ingredients
Cost
Drivers
Number of hours
spent with
customer
Number of
purchase
requisitions
Direct Labor
hours
Estimated
Overhead
$15,000
$15,000
$40,000
$70,000
3. Custom Wedding Cake
Expected
Use of Cost
Drivers
4.5 hours
$10,000
1000
requisitions
5.5 hours
9.5 hours
Expected
Use of Cost
Driver:
Basic
Wedding
Cake
0.75 hour
Making and
baking the
wedding cakes
Decorating the
wedding cakes
Final customer
Direct Labor
hours
Number of
meeting and cake wedding cakes
delivery
a. Explain the difference between a job-order costing system and an activity-based costing system.
4200
150
requisitions
1.25 hour
1.75 hours
Expected
Use of Cost
Driver
Multi-Layer
Wedding
Cake
1.25 hours
1500 cakes
300
requisitions
2 hours
3 hours
Expected
Use of Cost
1700 cakes
Driver…
Chapter C Solutions
Principles of Financial Accounting.
Ch. C - Why are overhead costs allocated to products and...Ch. C - Prob. 2DQCh. C - Prob. 3DQCh. C - What is activity-based costing? What is its goal?Ch. C - Prob. 5DQCh. C - Prob. 6DQCh. C - Prob. 7DQCh. C - Identify at least four typical cost pools for...Ch. C - Prob. 9DQCh. C - Prob. 10DQ
Ch. C - Prob. 11DQCh. C - Prob. 1QSCh. C - Prob. 2QSCh. C - Prob. 3QSCh. C - Prob. 4QSCh. C - Prob. 5QSCh. C - Prob. 6QSCh. C - Prob. 7QSCh. C - Prob. 1ECh. C - Prob. 2ECh. C - Prob. 3ECh. C - Prob. 4ECh. C - Prob. 5ECh. C - Prob. 6ECh. C - Maxlon Company manufactures custom-made furniture...Ch. C - Prob. 5APCh. C - Prob. 6APCh. C - SP 1 This serial problem began in Chapter 1 and...
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