Question

(course code:ACCT 231) Cost and Management Accounting Assignment

E12-7 Entries for Factory Overhead. Black Inc. assembles and sells hand drills. All parts are purchased, and the cost of the parts per drill cost $50. Labor is paid on the basis of $32 per drill assembled. Because the company handles only this one product, the unit cost base is used for applying factory overhead at a predetermined rate. Estimated factory overhead for the coming period, based on a production of 30,000 drills, is as follows:

Indirect materials……………………….. $220,000
Indirect labor…………………………… 240,000
Light and power…………………………. 30,000
Depreciation…………………………….. 25,000
Miscellaneous…………………………… 55,000

During the period, actual factory overhead was $561,600 and 29,000 drills were assembled. These units were completed not yet transferred to the finished goods storeroom.

Required:
(1) Prepare the journal entries to record the preceding information
(2) Determine the amount of over-or underapplied factory overhead
 
P12-6 Inventory Costing; Overhead Analysis,; Statement of Cost of Goods Sold. Dagnut Company set normal capacity at 60,000 machine hours.   The expected operating level for the period just ended was 45,000 hours. At this expected actual capacity, variable expenses were estimated to be $29,250 and fixed expenses, $18,000. Actual results show that 47,000 machine hours were used and that actual factory overhead totaled $48,000 during the period.

Required:
(1) Compute the predetermined factory overhead rate based on normal capacity.
(2) Compute the predetermined factory overhead rate based on expected actual capacity.
(3) Compute the amount of factory overhead charged to production if the company used the normal capacity rate.
(4) Compute the amount of factory overhead charged to production if the company used the expected actual capacity rate.
(5) Compute the amount of over-or underapplied overhead if the company used the expected actual capacity rate.

Answer 1

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Black Inc.
Workings	Amount $	Note
Number of drills assembled	29,000.00	A
Cost of the parts per drill	50.00	B
Direct Material costs	1,450,000.00	C=A*B
Number of drills assembled	29,000.00	See A
Labor Cost per drill	32.00	D
Direct labor costs	928,000.00	E=A*D
Indirect materials	220,000.00
Indirect labor	240,000.00
Light and power	30,000.00
Depreciation	25,000.00
Miscellaneous	55,000.00
Estimated manufacturing overhead	570,000.00	F
Estimated number of drills	30,000.00	G
Manufacturing overhead rate	19.00	H=F/G
Number of drills assembled	29,000.00	See A
Manufacturing overhead applied	551,000.00	I=H*A

Answer 1- Journal Entries
Accounts	Debit $	Credit $	Note
Work in process	1,450,000.00		See C
Raw Materials		1,450,000.00
Work in process	928,000.00		See E
Direct labor costs		928,000.00
Work in process	551,000.00		See I
Manufacturing overhead		551,000.00

Answer 2	Amount $	Note
Actual Manufacturing overhead	561,600.00	J
Manufacturing overhead applied	551,000.00	See I
Under applied	10,600.00	K=J-I
Dagnut Company
Answer 1	Amount $
Variable expenses at expected actual capacity	29,250.00	L
Expected actual capacity	45,000.00	M
Variable expenses per hour	0.65	N=L/M
Fixed expenses at expected actual capacity	18,000.00	O
Normal capacity	60,000.00	P
Fixed expenses per hour	0.30	Q=O/P
Predetermined factory overhead rate based on normal capacity	0.95	R=O+Q
Answer 2
Fixed expenses at expected actual capacity	18,000.00	See O
Expected actual capacity	45,000.00	See M
Fixed expenses per hour	0.40	S=O/M
Variable expenses per hour	0.65	See N
Predetermined factory overhead rate based on expected actual capacity	1.05	T=S+N
Answer 3
Actual machine hours	47,000.00	U
Predetermined factory overhead rate based on normal capacity	0.95	See R
Factory overhead charged to production if the company used the normal capacity rate	44,650.00	V=U*R
Answer 4
Actual machine hours	47,000.00	See U
Predetermined factory overhead rate based on expected actual capacity	1.05	See T
Factory overhead charged to production if the company used the expected actual capacity rate	49,350.00	W=U*T
Answer 5
Actual factory overhead	48,000.00	X
Factory overhead charged to production if the company used the expected actual capacity rate	49,350.00	See W
Over applied	1,350.00	Y=W-X