Question

PLEASE UPLOAD EXCEL FILE OR A SCREENSHOT SHOWING FORMULAS

Must be submitted in excel with any math done with formulas within cells.

Electric Car Co (ECC). currently manufactures two different types of fully electronic cars in 2021. Type 8Y is a large SUV whereas Type 8W will be the fastest car in the world with 10 rocket thrusters. ECC has decided to use ABC costing instead of traditional costing. The 2021 budget to manufacture these new types include manufacturing overhead of $126,920,760 which has been allocated on each product’s inspection hours. The expected prime costs of two new types are as follows:

	Type 8Y	Type 8W
Prime Costs	$20,915	$43,625

ECC’s controller believes the traditional costing system may be providing misleading cost information. They have developed an analysis of the 2021 budgeted manufacturing-overhead costs shown in the following chart.

Activity	Cost Driver	Budgeted Activity	Budgeted Cost
Assembly	Assembly hours	10,000	$63,460,000
Inspection	Inspection hours	10,000	$27,920,000
Painting	Gallons of paint	5,000	$22,850,000
Quality control	Number of tests	8,000	$12,690,760
Total manufacturing-overhead cost			$126,920,760

Actual data regarding the 2021 manufacturing of the Type 8Y and the Type 8W is shown in the following table with a total MOH of $216,920,760:

	Type 8Y	Type 8W
Budgeted Sales (units)	2,222	555
Assembly hours	767	2,955
Inspection hours	767	2,955
Paint Gallons	383	1477
Tests	612	2364

Required:

1) Using

1. Determine the company’s predetermined overhead rate(s) applied

2. Determine how much overhead was applied to Type 8Y

3. Provide the MOH true up journal entry required for this method at the end of the

2. Determine how much overhead was applied to Type 8Y

3. Provide the MOH true up journal entry required for this method at the end of the

   year

Answer 1

1. Calculation of pre-determined overhead rate applied using inspection hours as the base:

Activity	Costs
Assembly	$63,460,000
Inspection	$27,920,000
Painting	$22,850,000
Quality Control	$12,690,760
Total manufacturing overhead cost	$126,920,760

Total inspections hours = 10,000 hours

Pre-determined overhead rate = Total manufacturing overhead cost / Total inspections hours

= $126,920,760 / 10,000 = $12,692 per inspection hour

2. Calculation of overheads applied to Type 8Y:

Actual inspection hours incurred for Type 8Y = 767 inspection hours

Manufacturing overhead cost applied to Type 8Y = Number of inspection hours x pre-determined overhead rate

= 767 x $12,692 = $9,734,764

Manufacturing overhead cost per unit = Total Manufacturing overhead cost applied to 8Y / Budgeted sales in units

= $9,734,764 / 2,222 = $4,381

3. Journal entry to record the manufacturing overhead cost incurred:

Year	General Journal	Debit	Credit
2021	Work-in-process inventory A/c Dr.	$9,734,764
	To Manufacturing overhead A/c Cr.		$9,734,764
	(To record the actual manufacturing overhead cost incurred for Type 8Y model)