In: Accounting

Jordan Company currently is using a plant-wide factory overhead rate based on machine hours. The budgeted...

Jordan Company currently is using a plant-wide factory overhead rate based on machine hours. The budgeted factory overhead costs is $405,000. Company has two departments, X and Y. Company is considering use of departmental overhead rates for the allocation of each departments’ overhead costs to jobs. Overhead would be applied based on direct labor cost in Department X and machine-hours in Department Y. The following additional information is available: Budgeted Amounts Department X Department Y Direct labor cost$180,000                     $165,000 Factory overhead$225,000                     $180,000 Machine-hours 51,000 mh 40,000 mh Actual data for Job #10 Department X Department Y Direct materials requisitioned$10,000                      $16,000 Direct labor cost$11,000                       $14,000 Machine-hours 5,000 mh 3,000 mh 1. Compute total cost of manufacturing Job 10 under current system (using plant-wide rate). 2. Compute total cost of manufacturing Job 10 using departmental overhead rates. Solutions Expert Solution 1. TOTAL COST USING PLANT WIDE RATE. WORKING NOTE 1 – CALCULATION OF PLANT WIDE RATE TOTAL BUDGETED FACTORY OVERHEAD =225000+180000 =405000 TOTAL BUDGETED MACHINE HOURS = 51000+40000 =91000 PLANT WIDE RATE = 405000/91000 =4.451 (ROUNDED OFF) WORKING NOTE 2 – CALCULATION OF FACTORY OVERHEAD BASED ON ACTUAL DATA  DEPARTMENT - X DEPARTMENT - Y MACHINE HOURS (ACTUAL) 5000 3000 PLANT WIDE RATE (WN -1) 4.451 4.451 FACTORY OVERHEAD 22255 (5000*4.451) 13353 (3000*4.451) WORKING NOTE 3 – CALCULATION OF TOTAL COST  PERTICULARS DEPARTMENT - X DEPARTMENT - Y TOTAL DIRECT METERIAL 10000 16000 26000 DIRECT LABOUR COST 11000 14000 25000 FACTORY OVERHEAD(WN-2) 22255 13353 35608 TOTAL 43255 43353 86608 TOTAL COST OF MANUFACTURING JOB 10 UNDER PLANT WIDE RATE =$86608

1. TOTAL COST USING DEPARTMENTAL OVERHEAD RATE

WORKING NOTE 1 – CALCULATION OF DEPARTMENTAL OVERHEAD RATE

 DEPARTMENT - X DEPARTMENT - Y BUDGETED FACTORY OVERHEAD 225000 180000 BUDGETED DIRECT LABOUR COST 180000 - BUDGETED MACHINE HOURS - 40000 OVERHEAD RATE 1.25 (225000/180000) 4.5 (180000/40000)

WORKING NOTE 2 – CALCULATION OF FACTORY OVERHEAD BASED ON ACTUAL DATA

 DEPRTMNT - X DEPRTMNT - Y OVERHEAD RATE 1.25 4.5 DIRECT LABOUR COST (ACTUAL) 11000 - MACHINE HOURS (ACTUAL) - 3000 FACTORY OVERHEAD 13750 (1.25*11000) 13500 (4.5*3000)

WORKING NOTE 3 – CALCULATION OF TOTAL COST USING DEPARTMENTAL OVERHEAD RATE

 PERTICULARS DEPARTMENT - X DEPARTMENT - Y TOTAL DIRECT METERIAL 10000 16000 26000 DIRECT LABOUR COST 11000 14000 25000 FACTORY OVERHEAD(WN-2) 13750 13500 27250 TOTAL 34750 43500 78250

Martinez Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $362,000 and budgeted machine-hours were 24,000. Actual factory overhead was$393,000 and actual machine-hours were 27,000. Before disposition of under/overapplied overhead, the cost of goods sold was $610,000 and ending inventories were as follows: Direct materials$ 80,000             WIP                                        200,000             Finished goods                       270,000                   Total                               $550,000 Required: a. Determine the budgeted factory overhead rate per machine-hour. b. Compute the over/underapplied overhead. c. Prepare the journal entry to dispose of the variance using the write-off to cost of... Northface Company applies overhead based upon labor-hours. Budgeted factory overhead was$910,000 and budgeted labor-hours were...
Northface Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and budgeted labor-hours were 32,500. Actual factory overhead was$893,675 and actual labor-hours were 31,560. Required: a. Compute the overhead application rate. b. Compute the amount of overhead applied to production. c. Determine the amount of over- or underapplied overhead.