# [Get Solution] BE17-5 Compute activity-based overhead rates

Classify manufacturing costs (LO 3), C Determine whether each of the following costs should be classified as direct materials (DM), direct labor (DL), or manufacturing overhead (MO).

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(a) _____ Frames and tires used in manufacturing bicycles.

(b) _____ Wages paid to production workers.

(c) _____ Insurance on factory equipment and machinery.

(d) _____ Depreciation on factory equipment.

BE14-6 Identify product and period costs. (LO 4), C Identify whether each of the following costs should be classified as product costs or period costs.

(b) _____ Selling expenses.

(e) _____ Direct labor.

(f) _____ Direct material.

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BE14-8 Compute total manufacturing costs and total cost of work in process. (LO 6), AP Francum Company has the following data: direct labor \$209,000, direct materials used \$180,000, total manufacturing overhead \$208,000, and beginning work in process \$25,000. Compute

(a) total manufacturing costs and

(b) total cost of work in process.

BE14-10 Determine missing amounts in computing total manufacturing costs. (LO 6), AP Presented below are incomplete manufacturing cost data. Determine the missing amounts for three different situations. Direct Materials Used Direct Labor Used Factory Overhead Total Manufacturing Costs

(1) \$40,000 \$61,000 \$ 50,000 ?

(2) ? \$75,000 \$140,000 \$296,000

(3) \$55,000 ? \$111,000 \$310,000 E14-3 Identify types of cost and explain their accounting. (LO 3, 4),

C Ryan Corporation incurred the following costs while manufacturing its product. Materials used in product \$100,000 Advertising expense \$45,000 Depreciation on plant 60,000 Property taxes on plant 14,000 Property taxes on store 7,500 Delivery expense 21,000 Labor costs of assembly-line workers 110,000 Sales commissions 35,000 Factory supplies used 13,000 Salaries paid to sales clerks 50,000 Instructions (a) Identify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs. (b) Explain the basic difference in accounting for product costs and period costs.

E14-4 Determine the total amount of various types of costs. (LO 3, 4), AP Knight Company reports the following costs and expenses in May. Factory utilities \$ 15,500 Direct labor \$69,100 Depreciation on factory equipment 12,650 Sales salaries 46,400 Depreciation on delivery trucks 3,800 Property taxes on factory building 2,500 Indirect factory labor 48,900 Repairs to office equipment 1,300 Indirect materials 80,800 Factory repairs 2,000 Direct materials used 137,600 Advertising 15,000 Factory manager’s salary 8,000 Office supplies used 2,640 Instructions From the information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c) Period costs.

E14-5 Classify various costs into different cost categories. (LO 3, 4), C Ikerd Company is a manufacturer of personal computers. Various costs and expenses associated with its operations are as follows. 1. Property taxes on the factory building. 2. Production superintendents’ salaries. 3. Memory boards and chips used in assembling computers. 4. Depreciation on the factory equipment. 5. Salaries for assembly-line quality control inspectors. 6. Sales commissions paid to sell personal computers. 7. Electrical components used in assembling computers. 8. Wages of workers assembling personal computers. 9. Soldering materials used on factory assembly lines. 10. Salaries for the night security guards for the factory building. The company intends to classify these costs and expenses into the following categories: (a) direct materials, (b) direct labor, (c) manufacturing overhead, and (d) period costs. Instructions List the items (1) through (10). For each item, indicate the cost category to which it belongs.

E14-12 Prepare a cost of goods manufactured schedule and a partial income statement. (LO 5, 6), AP Cepeda Corporation has the following cost records for June 2014. Indirect factory labor \$ 4,500 Factory utilities \$ 400 Direct materials used 20,000 Depreciation, factory equipment 1,400 Work in process, 6/1/14 3,000 Direct labor 40,000 Work in process, 6/30/14 3,800 Maintenance, factory equipment 1,800 Finished goods, 6/1/14 5,000 Indirect materials 2,200 Finished goods, 6/30/14 7,500 Factory manager’s salary 3,000 Instructions (a) Prepare a cost of goods manufactured schedule for June 2014. (b) Prepare an income statement through gross profit for June 2014 assuming sales revenue is \$92,100.

E15-1 Prepare entries for factory labor. (LO 2, 3), AP The gross earnings of the factory workers for Vargas Company during the month of January are \$66,000. The employer’s payroll taxes for the factory payroll are \$8,000. The fringe benefits to be paid by the employer on this payroll are \$6,000. Of the total accumulated cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor. Instructions (a) Prepare the entry to record the factory labor costs for the month of January. (b) Prepare the entry to assign factory labor to production.

E15-3 Analyze a job cost sheet and prepare entries for manufacturing costs. (LO 2, 3, 4, 5), AP A job order cost sheet for Lowry Company is shown below. Instructions (a) On the basis of the foregoing data, answer the following questions. 1. What was the balance in Work in Process Inventory on January 1 if this was the only unfinished job? 2. If manufacturing overhead is applied on the basis of direct labor cost, what overhead rate was used in each year? (b) Prepare summary entries at January 31 to record the current year’s transactions pertaining to Job No. 92.

E15-5 Compute the manufacturing overhead rate and under- or overapplied overhead. (LO 4, 6), AN Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total \$325,000 for the year, and machine usage is estimated at 125,000 hours. For the year, \$342,000 of overhead costs are incurred and 130,000 hours are used. Instructions (a) Compute the manufacturing overhead rate for the year. (b) What is the amount of under- or overapplied overhead at December 31? (c) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

E15-7 Prepare entries for manufacturing and nonmanufacturing costs. (LO 2, 3, 4, 5), AP Torre Corporation incurred the following transactions.

1. Purchased raw materials on account \$46,300.

2. Raw materials of \$36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that \$6,800 was classified as indirect materials.

3. Factory labor costs incurred were \$55,900, of which \$51,000 pertained to factory wages payable and \$4,900 pertained to employer payroll taxes payable.

4. Time tickets indicated that \$50,000 was direct labor and \$5,900 was indirect labor.

5. Manufacturing overhead costs incurred on account were \$80,500.

6. Depreciation on the company’s office building was \$8,100.

7. Manufacturing overhead was applied at the rate of 150% of direct labor cost.

8. Goods costing \$88,000 were completed and transferred to finished goods.

9. Finished goods costing \$75,000 to manufacture were sold on account for \$103,000. Instructions Journalize the transactions. (Omit explanations.) BE17-1 Identify differences between costing systems. (LO 1), AP Warner Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year. Budgeted Actual Overhead cost \$1,000,000 \$950,000 Machine hours 50,000 45,000 Direct labor hours 100,000 92,000 Overhead is applied on the basis of direct labor hours. (a) Compute the predetermined overhead rate. (b) Determine the amount of overhead applied for the year. (c) Explain how an activity-based costing system might differ in terms of computing a predetermined overhead rate.
Tag: cepeda corporation has the following cost records for june 2014

BE17-3 Identify cost drivers. (LO 4), AP Storrer Co. identifies the following activities that pertain to manufacturing overhead: materials handling, machine setups, factory machine maintenance, factory supervision, and quality control. For each activity, identify an appropriate cost driver.

BE17-5 Compute activity-based overhead rates. (LO 4), AP Mordica Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is \$150,000, \$325,000, and \$87,500, respectively. The cost driver for each activity and the expected annual usage are number of setups 2,500, machine hours 25,000, and number of inspections 1,750. Compute the overhead rate for each activity.

E17-1 Assign overhead using traditional costing and ABC. (LO 1, 4), AP Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations. Standard Custom Direct labor costs \$50,000 \$100,000 Machine hours 1,000 1,000 Setup hours 100 400 Total estimated overhead costs are \$270,000. Overhead cost allocated to the machining activity cost pool is \$170,000, and \$100,000 is allocated to the machine setup activity cost pool. Instructions (a) Compute the overhead rate using the traditional (plantwide) approach. (b) Compute the overhead rates using the activity-based costing approach. (c) Determine the difference in allocation between the two approaches.
Tag: cepeda corporation has the following cost records for june 2014

E17-3 Assign overhead using traditional costing and ABC. (LO 1, 4), AN American Fabrics has budgeted overhead costs of \$990,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 450,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers.

These two cost pools are: cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is \$360,000 and \$630,000 is allocated to the design cost pool. Additional information related to these pools is as follows. Wool Cotton Total Machine hours 100,000 100,000 200,000 Number of setups 1,000 500 1,500 Instructions

(a) Determine the amount of overhead allocated to the wool product line and the cotton product line using activity-based costing. (b) What amount of overhead would be allocated to the wool and cotton product lines using the traditional approach, assuming direct labor hours were incurred evenly between the wool and cotton? How does this compare with the amount allocated using ABC in part (a)?

Tag: cepeda corporation has the following cost records for june 2014

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