Question

PlasticsRus Pty Ltd manufactured 100 000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February: Actual Budgeted Production 100 000 units 100 000 units Machine-hours 9800 hours 10 000 hours Variable overhead cost per machine-hour $5.25 $5.00 What is the variable overhead efficiency variance? a. $1000 favourable b. $1450 unfavourable c. $2450 unfavourable d. $2450 favourable e. No correct answer

Wagga Wagga Textiles is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Tumut Brass Band band jacket job. Company Tumut Brass Band Job Direct materials $40 000 $1000 Direct labour $10 000 $ 200 Manufacturing overhead costs $30 000 Machine-hours 100 000 mh 900 mh What amount of manufacturing overhead costs will be allocated to Band job? Note: round up the overhead allocation rate to two decimal a. $270 b. $720 c. $30 000 d. $450 e. No correct ans

Because the Goulburn Company used a budgeted indirect-cost rate for its manufacturing operations, the amount allocated ($200 000) was different from the actual amount incurred ($225 000). Ending balances in the relevant accounts are: Work in process $10 000 Finished goods 20 000 Cost of goods sold 170 000 What is the journal entry used to write off the difference between allocated and actual overhead using the proration approach? a. Manufacturing Overhead Control 225 000 Work-in-Process Control 1250 Finished Goods Control 2500 Cost of Goods Sold 21 250 Manufacturing Overhead Allocated 200 000 b. Manufacturing Overhead Allocated 200 000 Work-in-Process Control 10 000 Finished Goods Control 20 000 Manufacturing Overhead Control 230 000 c. Manufacturing Overhead Allocated 225 000 Work-in-Process Control 1250 Finished Goods Control 2500 Cost of Goods Sold 21 250 Manufacturing Overhead Control 200 000 d. Manufacturing Overhead Allocated 200 000 Work-in-Process Control 1250 Finished Goods Control 2500 Cost of Goods Sold 21 250 Manufacturing Overhead Control 225 000

Answer 1

Solution:

PlasticsRus Pty Ltd manufactured 100 000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February: Actual Budgeted Production 100 000 units 100 000 units Machine-hours 9800 hours 10 000 hours Variable overhead cost per machine-hour $5.25 $5.00

What is the variable overhead efficiency variance?

a. $1000 favourable

Working Notes

Manufacturing Overhead volume Variance	(Actual hours worked × Standard rate) – (Standard hours allowed × Standard rate)
Actual Hours	9800
Actual rate	5.25
Standard rate	5
Standard Hours	10000
Manufacturing Overhead volume Variance	1000	Favorable

Wagga Wagga Textiles is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Tumut Brass Band band jacket job. Company Tumut Brass Band Job Direct materials $40 000 $1000 Direct labour $10 000 $ 200 Manufacturing overhead costs $30 000 Machine-hours 100 000 mh 900 mh

What amount of manufacturing overhead costs will be allocated to Band job?

a. $270

Working Notes

Overhead Allocation Rate = Total Manufacturing Overhead / Total Machine Hours

                                          = 30000 / 100000

                                          =$0.30 per Machine Hour

Machine hours used for Band Job = 900 Machine Hours

Overhead Allocated = 900*$0.30 = $270

Because the Goulburn Company used a budgeted indirect-cost rate for its manufacturing operations, the amount allocated ($200 000) was different from the actual amount incurred ($225 000). Ending balances in the relevant accounts are: Work in process $10 000 Finished goods 20 000 Cost of goods sold 170 000

What is the journal entry used to write off the difference between allocated and actual overhead using the proration approach?

d. Manufacturing Overhead Allocated 200 000 Work-in-Process Control 1250 Finished Goods Control 2500 Cost of Goods Sold 21 250 Manufacturing Overhead Control 225 000

Working Notes:

Actual Manufacturing Overhead incurred must be distributed to WIP, Finished Goods and Cost of Goods Sold in the proportion of their ending balances. Accounts to which the amount is allocated needs to be Debited and Manufacturing Overhead Control account needs to be credited with the actual amount.

	Ending Balances	% for Allocation	Amount to be allocated
Work In Process	10000	=10000/200000	5.00%	=25000*5%	1250
Finished Goods	20000	=20000/200000	10.00%	=25000*10%	2500
Cost of Goods Sold	170000	=170000/200000	85.00%	=25000*85%	21250
Total	200000	=200000/200000	100.00%		25000

Hope this helps! In case of any clarifications, kindly use the comment box below