Costs and Direct Labor Cost

Midterm2Practice Key 1. The following info have been save for recently completed Job 501 on its job bell sheet. take aim literals outlay was $3,067. A meat of 30 require grasp-hours and 104 apparatus-hours were worked on the job. The manoeuvre comprehend wage rate is $12 per labor-hour. The company applies manufacturing smash on the basis of machinehours. The regulate smash rate is $11 per machine-hour. The total represent for the job on its job mo boodleary value sheet would be A. $4,571 B. $3,757 C. $3,090 D. 3,427 apply manufacturing knock = Predetermined hit rate x Actual machine-hours employ manufacturing overhead = $11 x 104 Applied manufacturing overhead = $1,144 join damage = Direct materials + Direct labor + Applied manufacturing overhead check bell of Job 607 = $3,067 + (30 x $12) + $1,144 = $4,571 Loraine ships company applies manufacturing overhead to jobs using a predetermined overhead rate of 70% of ask labor embody. Any underapplied or overa pplied overhead damage is closed to Cost of Goods Sold at the displace of the month. During August, the following transactions were recorded by the company 2.The amount of consider materials apostrophize in the August 31 Work in answer inventory account was A. $10, two hundred B. $9,000 C. $4,800 D. $4,200 3. The Cost of Goods Manufactured for August was A. $69,600 B. $69,500 C. $76,900 D. $84,500 4. The balance on August 1 in the Raw Materials inventory account was A. $4,500 B. $7,000 C. $9,000 D. $11,500 5. Schrick Inc. manufactures a variety of harvests. Variable costing net operating income was $86,800 last yr and ending inventory increased by 1,900 building blocks. Fixed manufacturing overhead cost was $6 per unit. What was the preoccupation costing net operating income last socio-economic class? A. 86,800 B. $75,400 C. $98,200 D. $11,400 Fixed manufacturing overhead deferred = $6 x 1,900 = $11,400 Absorption costing net income = Variable costing net operating income + Fixed manufacturing overhead deferred = $86,800 + $11,400 = $98,200 6. Ben Company produces a single produce. Last year, the companys net operating income under immersion costing was $4,400 lower than under multivariate costing. The company sold 8,000 units during the year, and its variable cost were $8 per unit, of which $3 was variable selling expense. Fixed manufacturing overhead was $1 per unit in beginning inventory under absorption costing.How many units did the company produce during the year? A. 12,400 units B. 3,600 units C. 7,120 units D. 7,450 units unit of measurement fixed manufacturing overhead = (Difference in income / Change in inventory) = $4,400 Change in inventory = $1 Change in inventory = 4,400 units Units produced during the year = 8,000 units sold 4,400 units change in inventory = 3,600 units Ross Company produces a single carrefour. The company has contribute materials cost of $8 per unit, direct labor costs of $6 per unit, and manufacturing overhead of $10 per unit. Sixty percent of the manufacturing overhead is for fixed costs.In addition, variable selling and administrative costs be $2 per unit, and fixed selling and administrative costs be $3 per unit at the current occupation level. have that direct labor is a variable cost. 7. beneath absorption costing, the unit product cost is A. $24 B. $20 C. $26 D. $29 Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead cost + Fixed manufacturing overhead cost = $8 + $6 + $10* = $24 * Manufacturing overhead cost of $10 includes variable and fixed costs. 8. Under variable costing, the unit product cost is A. $24 B. $20 C. $18 D. 21 Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead = $8 + $6 + $10 x (100% 60%) = $8 + $6 + $4= $18 9. Viren gage has provided the following data from its activity-based costing frame The company makes 240 units of product T91H a year, requiring a total of 550 machine-hours, 90 orde rs, and 40 inspection-hours per year. The products direct materials cost is $16. 98 per unit and its direct labor cost is $12. 09 per unit. According to the activity-based costing formation, the average cost of product T91H is closest to A. $79. 66 per unit B. 90. 81 per unit C. $29. 07 per unit D. $75. 70 per unit 10. Data concerning three of the activity cost pools of Bramhall LLC, a levelheaded firm, have been provided below The activity rate for the impact with clients activity cost pool is closest to A. $125 per meeting hour B. $65 per meeting hour C. $80 per meeting hour D. $665,500 per meeting hour Kleppe Corporation has provided the following data from its activity-based costing accounting system The Other activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products. 1. How much indirect grinder wages and factory equipment disparagement cost would be assigned to the Customer Orders activity cost pool? A. $2 40,000 B. $72,000 C. $68,000 D. $480,000 12. How much indirect factory wages and factory equipment depreciation cost would NOT be assigned to products using the activity-based costing system? A. $0 B. $68,000 C. $280,000 D. $200,000 13. In this problem, there are three possible overhead allocation bases direct labor (present system), machine hours (the proposed system), and number of hatfules.First, calculate product costs under each of the three allocation schemes (a). Direct labor cost as the allocation base (present system) Bluethings 120,000 . 50 $60,000 95. 238% 342,857 60,000 $462,857 $ 3. 857 Graythings 6,000 . 50 $3,000 4. 762% 17,143 3,000 $23,143 $ 3. 857 Total 126,000 depend of units Direct labor/unit Direct labor cost % of total direct labor cost disk overhead allocated Direct material cost Total cost Unit cost $63,000 360,000 63,000 $486,000 (b). Machine hours as the allocation base (proposed system) Bluethings 120,000 600 200 20 4000 95. 38% $342,857 60,000 60,000 $ 462,857 $ 3. 857 Graythings 6,000 30 200 1 200 4. 762% $17,143 3,000 3,000 $23,143 $ 3. 857 Total 126,000 Number of units/year ? number of units/batch Number of batches/year x number of hours per batch Number of machine hours/year % of total machine hours Overhead allocated Direct labor cost Direct material cost Total cost Unit cost 4200 $360,000 63,000 63,000 $486,000 (c). Number of batches as the allocation base Bluethings 120,000 600 200 50% $180,000 60,000 60,000 $300,000 $2. 50 Graythings 6,000 30 200 50% $180,000 3,000 3,000 $186,000 $31. 0 Total 126,000 400 Number of units/year ? number of units/batch Number of batches/year % of total batches Overhead allocated Direct labor cost Direct material cost Total cost Unit cost $360,000 63,000 63,000 $486,000 Notice that allocating overhead by each direct labor or machine hours produces identical product costs. Thus, the proposed system change will not affect decision making. There are two cost drivers in Set-up Company. Unit volume drives direct materials and direct labor, but set-ups (number of batches) appear to drive overhead costs.Allocating overhead using direct labor gives an incorrect impression of how overhead costs vary and distorts product costs. Overhead costs are incurred in setups. While run measure per unit of thing is the same for blues and grays, batch sizes differ considerably. In fact, bluethings and graythings each required 200 batches. Therefore, each product line (as contrary to each unit of product) should be allocated an equal dollar amount of overhead. If this is done, indeed graythings become massive losers and bluethings are seen to be profitable, even with market price of $3 per unit.