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Accounting II (Ludwig) Graded Assignment 7 – Chapter 19 Spring 2019 In December 2017, Challenger Watercraft’s...

Accounting II (Ludwig)

Graded Assignment 7 – Chapter 19

Spring 2019

In December 2017, Challenger Watercraft’s manager estimated next year’s (2018) total direct labor cost assuming five employees working an average of 2,000 hours each at an average wage rate of $10 per hour ($100,000). The manager also estimated manufacturing overhead costs for 2017 of $200,000.

At the end of 2018, records show the company incurred $199,000 of actual overhead costs.

The following jobs were started and completed and were charged with the following direct material and labor costs.

Job

Direct Material

Direct

Labor

Manufacturing

Overhead

Total Cost

of Job

136

$50,000

$12,100

137

$33,000

$10,800

138

$19,800

$37,500

139

$22,600

$39,400

140

$6,800

$3,200

Totals

$132,200

$103,000

Required

  1. Determine the predetermined overhead rate for 2018. The company assigns overhead costs based upon direct labor cost.
  2. Determine the manufacturing overhead cost applied to each of the six jobs and in total and enter in the table above.
  3. Determine the total cost of each of the six jobs and enter in the table above.
  4. Determine the amount of over or underapplied manufacturing overhead and label appropriately. You might consider representing the manufacturing overhead temporary expense account as a T-account with actual costs on the debit side and applied costs on the credit side.

Solutions

Expert Solution

1] Predetermined OH rate = Estimated overhead/Estimated base = 200000/100000 = 200.00% of direct labor cost
2] JOBWISE COST OF PRODUCTION:
JOB NO Direct Material Direct Labor Mfg. OH Applied Total Cost of Job
136 $          50,000 $         12,100 $         24,200 $         86,300
137 $          33,000 $         10,800 $         21,600 $         65,400
138 $          19,800 $         37,500 $         75,000 $ 1,32,300
139 $          22,600 $         39,400 $         78,800 $ 1,40,800
140 $            6,800 $           3,200 $           6,400 $         16,400
Total $ 1,32,200 $ 1,03,000 $ 2,06,000 $ 4,41,200
3] Actual overheads $      1,99,000
Overhead applied $      2,06,000
Overapplied OH = 206000-199000 = $ 7,000
MANUFACTURING OVERHEAD
Cash/AP $ 1,99,000 $ 2,06,000 OH applied
End bal $        7,000

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