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DeVry University South Florida - ACCT 346 ACCT346 ...
DeVry_University_South_Florida_-_ACCT_346_ACCT346_Week_2_Homework_Notes_with_Answers.docx-DeVry University ACCT346 Weekly Assignment –
DeVry University South Florida - AC...
DeVry_University_South_Florida_-_ACCT_346_ACCT346_Week_2_Homework_Notes_with_Answers.docx-DeVry University ACCT346 Weekly Assignment –
Page 1
DeVry University
ACCT346 Weekly Assignment –
ANSWERS
Week 2
Directions: Complete the three questions below and please be sure to show all of
your calculation work
along with the final answers in the box provided for each
question.
Also note that Question #3 has TWO parts, Part A and Part B. To give
yourself more room to insert your calculations and answers, you may need to add
more rows or columns to the boxes below.
1.
Biltz Company uses a predetermined manufacturing overhead rate based on direct
labor hours to allocate (apply or charge) manufacturing overhead costs to jobs. During
the year, the company
actually
incurred manufacturing overhead costs of $582,000 and
135,000 direct labor hours were worked. The company originally
estimated
that it
would incur $525,000 of manufacturing overhead during the year and that 150,000
direct labor hours would be worked.
How much was manufacturing overhead over-allocated (over-applied) or under-
allocated (under-applied) for the year?
Answer
:
Note that for this problem all figures are annual values, as given.
Step 1
:
Predetermined Manufacturing Overhead Rate
= $525,000 estimated manufacturing overhead costs / 150,000 estimated
direct labor hours
= $3.50 per DLH
Step 2
:
$3.50 per DLH × 135,000 actual hours worked
= $472,500 allocated (applied) to all jobs worked for the year
Step 3
:
Actual Manufacturing Overhead Costs – Allocated Overhead Applied to All Jobs for
the Year
= $582,000 - $472,500
=
$109,500 under-allocated (under-applied)
manufacturing overhead


Page 2
2.
The following account balances at the beginning of January were selected from the
general ledger of Ocean City Manufacturing Company:
Work-in-Process (WIP)
inventory
$0
Raw materials inventory
$28,000
Finished goods inventory
$40,000
Additional data:
1) Actual manufacturing overhead for January amounted to $62,000.
2) Total direct labor cost for January was $63,000.
3) The predetermined manufacturing overhead rate is based on direct labor cost. The
budget for the year called for $250,000 of direct labor cost and $350,000 of manufacturing
overhead costs.
4) The only job unfinished on January 31 was Job No. 151, for which total direct labor
charges were $5,200 (800 direct labor hours) and total direct material charges were
$14,000.
5) Cost of direct materials placed in production during January totaled $123,000. There
were no indirect material requisitions during January.
6) January 31 balance in raw materials inventory was $35,000.
7) Finished goods inventory balance on January 31 was $34,500.
What is the cost of goods manufactured for January?
Answer
:
Predetermined Manufacturing Overhead Rate (based on
annual estimates
)
= $350,000 budgeted manufacturing overhead / $250,000 budgeted direct
labor costs
= 140% (or a
1.4 times
multiplier)
So for the month of January
:
Manufacturing overhead allocated (applied) = $63,000 actual direct labor costs × 140% =
$88,200
Total Manufacturing Costs (for month of January)
= Direct Material + Direct Labor + Manufacturing Overhead
= $123,000 + $63,000 + $88,200
= $274,200
Note: we’re given the Beginning WIP Balance for January = $0.
However, we’ll need to find the Ending WIP Balance for January (since it was not given to
us directly)
…so for the only unfinished job (Job No. 151):
Direct Materials + Direct Labor + Manufacturing Overhead Applied to Job
No. 151
= $14,000 + $5,200 + (1.40 * $5,200)
= $26,480
Cost of Goods Manufactured (for January)
= Beginning WIP Balance + Total Manufacturing Costs – Ending WIP Balance
= $0 + $274,200 - $26,480
=
$247,720


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