Question

In: Accounting

Lotus Ltd has identified the following overhead costs and cost drivers for next year Overhead Items...

Lotus Ltd has identified the following overhead costs and cost
drivers for next year
Overhead Items E ( cost) $
Setups cost 90,000
Ordering Cost 50,000
Maintenance cost 150,000
Power 30,000
Cost Driver E( actual transactions)
Number of setups 400
Number of orders 4,000
Machine Hours 25,000
Kilowatt hours 75,000
The following is one of the jobs completed during the year
Job 700 Job 701
Direct materials $1200 $600
Direct Labor $900 $400
Units completed 250 100
DLH 40 20
Number of setups 2 1
Number of orders 10 4
Machine hours 50 40
Kilowatt hours 60 25
Actual overhead $2500 $1250
The company’s practical activity is 9000 DHL

REQUIRED
Part A
1. Calculate the predetermined rate for Job 700 using FBC
based on DHL for each job
2. Calculate total product cost using FBC based on DHL for
job 700
3. Calculate the unit cost of the job
4. Is the overhead over-applied or under-applied
Part B
1. Calculate the PR for job 701 using machine hours
2. Calculate the total product cost using FBC based on machine
hours for job 701
3. Calculate the unit cost
4. Is the overhead under or over-applied?

Solutions

Expert Solution

Part A:

1. Predetermined rate based on DLH

Predetermined rate = Total Overhead costs / Total Direct Labor hours

Total Overhead costs = $90,000 + $50,000 + $150,000 + $30,000 = $320,000

Total Direct Labor hours = 9,000

Predetermined rate = $320,000 / 9,000 DLH = $35.56 per DLH

2. Total Product Cost based on DHL for job 700

Particulars $
Direct Materials 1,200.00
Direct Labor 900.00
Overhead costs (40 DHL * $35.56 per DHL) 1,422.40
Total Product costs 3,522.40

3. Unit Cost of job 700

Unit cost = $3,522.40 / 250 Units = $14.09 per unit

4. Under or over applied overheads

Applied overheads = 40 DLH * $35.56 per DLH = $1,422.40

Actual overheads = $2,500

Under applied overheads = $2,500 - $1,422.40 = $1,077.60

Part B:

1. Predetermined rate based on machine hours

Predetermined rate = Total Overhead costs / Total Machine hours

Total Overhead costs = $90,000 + $50,000 + $150,000 + $30,000 = $320,000

Total Machine hours = 25,000

Predetermined rate = $320,000 / 25,000 machine hours = $12.80 per machine hour

2. Total Product Cost based on DHL for job 701

Particulars $
Direct Materials 600
Direct Labor 400
Overhead costs (40 machine hours * $12.80) 512
Total Product costs 1,512

3. Unit Cost of job 701

Unit cost = $1,512 / 100 Units = $15.12 per unit

4. Under or over applied overheads

Applied overheads = 40 machine hours * $12.80 per machine hour = $512

Actual overheads = $1,250

Under applied overheads = $1,250 - $512 = $738

All the best...

ekkarill92 answered 5 months ago
Next > < Previous

Related Solutions

Leo Company has identified the following overhead costs and cost drivers for next year: Overhead Item...
Leo Company has identified the following overhead costs and cost drivers for next year: Overhead Item Expected Costs Cost Driver Maximum Quantity Setup costs $1,152,000 Number of setups 4,800 Ordering costs 320,000 Number of orders 40,000 Maintenance 1,600,000 Machine-hours 64,000 Power 160,000 Kilowatt-hours 400,000 The following is one of the jobs completed during the year: Job 201 Direct materials $18,000 Direct labor $24,000 Units completed 750 Direct labor-hours 180 Number of setups 12 Number of orders 16 Machine-hours 360 Kilowatt-hours...
5) A company has identified the following overhead costs and cost drivers for the coming year:...
5) A company has identified the following overhead costs and cost drivers for the coming year: Overhead Item Cost Driver Budgeted Cost Budgeted Activity Level Machine setup Number of setups $ 20,000 200 Inspection Number of inspections 130,000 6,500 Material handling Number of material moves 80,000 8,000 Engineering Engineering hours 50,000 1,000 Total $280,000 The following information was collected on three jobs that were completed during the year: Job 101 Job 102 Job 103 Direct materials $5,000 $12,000 $8,000 Direct...
Orange, Inc. has identified the following cost drivers for its expected overhead costs for the year:...
Orange, Inc. has identified the following cost drivers for its expected overhead costs for the year: Total overhead budgeted = $200,000 Total direct labor hours budgeted = 2,000 hours Actual direct labor hours worked on Job 21 = 100 Actual direct materials = $5,000 total Actual direct labor = $3,000 total Actual units completed = 100 The totoal cost of Job 21 is: a. $ 22,500 b. $ 16,000 c. $ 18,000 d. $ 19,900 The Total Cost of Job...
DAB Company has identified the following overhead activities, costs, and activity drivers for the coming year:...
DAB Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity                                Expected Cost          Activity Driver               Activity Capacity Material-handling costs.. £45,000             Number of moves.........        450 Machine costs................ £80,000             Machine hours.............. 20,000 Order costs.................... £15,000             Number of orders.........        750 Receiving costs.............. £30,000             Number of parts........... 50,000 Setup costs.................... £50,000             Number of setups.........        250 Assume that each activity corresponds to a process. DAB’s normal activity is 5,000 direct labor hours. The following two jobs...
Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce...
Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Type of Textbook Activity (Cost) Cost Driver Deluxe Moderate Economy Machine maintenance ($360,000) Number of machine hours 300 900 1,200 Setups ($640,000) Number of setups 30 15 5 Packing ($168,000) Number of cartons 15 35 55 Photo development ($680,000) Number of pictures 4,500 2,500 1,500 Deluxe textbooks are made with the finest-quality paper, six-color printing, and...
Grass Inc. identified the following overhead activities, their respective costs, and their cost drivers to produce...
Grass Inc. identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of lawn mowerss Type of Mowers   Activity (Cost) Cost Driver Deluxe Moderate Economy   Machine maintenance ($545,600)   Number of machine hours 220 780 1,200   Setups ($416,000)   Number of setups 29 13 6   Quality control ($203,322)   Number of inspections 15 34 45   Rent ($408,100)   Number of square feet 420 180 110 The company produced the following number of lawn mowers during the prior...
Multiple Versus Single Overhead Rates, Activity Drivers Deoro Company has identified the following overhead activities, costs,...
Multiple Versus Single Overhead Rates, Activity Drivers Deoro Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $466,260 Number of setups 570 Ordering costs 369,600 Number of orders 17,600 Machine costs 702,100 Machine hours 41,300 Receiving 414,000 Receiving hours 9,200 Deoro produces two models of dishwashers with the following expected prime costs and activity demands: Model A Model B Direct materials $574,000 $790,000 Direct...
Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at...
Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool                Cost Driver          Est. Overhead           Cost Driver Activity Ordering and Receiving         Orders                    $   120,000               500 orders Machine Setup                     Setups                        297,000               450 setups Machining                             Machine hours         1,500,000               125,000 MH Assembly                              Parts                        1,200,000               1,000,000 parts Inspection                             Inspections                 300,000               500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is a.   $9.60. b.  ...
Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures...
Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 710,000 100,000 parts Inspecting product 985,000 1,500 batches Processing purchase orders 190,000 700 orders Paying suppliers 260,000 500 invoices Insuring the factory 385,000 40,000 square feet Designing packaging 160,000 2 models Assume that the following information is available for the company’s two products for the first quarter of this...
Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures...
Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 675,000 100,000 parts Inspecting product 950,000 1,500 batches Processing purchase orders 155,000 700 orders Paying suppliers 225,000 500 invoices Insuring the factory 350,000 40,000 square feet Designing packaging 125,000 2 models     Required: 1. Compute a single plantwide overhead rate for the year, assuming that the company assigns overhead...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT