Chapter 3

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Chapter 3

Exercise 3-1 (10 minutes)
The estimated total manufacturing overhead cost is computed as follows:

Y = $466,000 + ($3.00 per DLH)(40,000 DLHs)

Estimated fixed manufacturing overhead
$466,000

Estimated variable manufacturing overhead:
$3.00 per DLH × 40,000 DLHs
  120,000

Estimated total manufacturing overhead cost
$586,000

The predetermined overhead rate is computed as follows:

Estimated total manufacturing overhead
$586,000

÷ Estimated total direct labor hours (DLHs)
40,000
DLHs
= Predetermined overhead rate
$14.65
per DLH

Exercise 3-2 (10 minutes)
Actual direct labor-hours
12,600
× Predetermined overhead rate
$23.10
= Manufacturing overhead applied
$291,060

Exercise 3-3 (10 minutes)
1.Total direct labor-hours required for Job A-200:

Direct labor cost
$120
÷ Direct labor wage rate per hour
$12
= Total direct labor hours
10

Total manufacturing cost assigned to Job A-200:

Direct materials
$200
Direct labor
120
Manufacturing overhead applied
($18 per DLH × 10 DLHs)
 180
Total manufacturing cost
$500

2.Unit product cost for Job A-200:

Total manufacturing cost
$500

÷ Number of units in the job
50
= Unit product cost
$10

Exercise 3-6 (20 minutes)
1.
Cost of Goods Manufactured

Direct materials:

Raw materials inventory, beginning
$24,000

Add: Purchases of raw materials
 53,000

Total raw materials available
77,000

Deduct: Raw materials inventory, ending
  6,000

Raw materials used in production
71,000

Deduct: Indirect materials included in manufacturing overhead   8,000
$ 63,000

Direct labor

62,000

Manufacturing overhead applied to work in process inventory

   41,000

Total manufacturing costs

166,000

Add: Beginning work in process inventory

   41,000

207,000

Deduct: Ending work in process inventory

   38,000

Cost of goods manufactured

$169,000

2.
Cost of Goods Sold

Finished goods inventory, beginning
$ 86,000

Add: Cost of goods manufactured
 169,000

Cost of goods available for sale
255,000

Deduct: Finished goods inventory, ending
   93,000

Unadjusted cost of goods sold
162,000

Add: Underapplied overhead
     8,000

Adjusted cost of goods sold
$170,000

Exercise 3-7 (10 minutes)
1.
Actual direct labor-hours
8,250

× Predetermined overhead rate
   $21.40

= Manufacturing overhead applied
$176,550

Less: Manufacturing overhead incurred
 172,500

Manufacturing overhead overapplied
$   4,050

2.Because manufacturing overhead is overapplied, the cost of goods sold would decrease by $4,050 and the gross margin would increase by $4,050. Exercise 3-8 (30 minutes)
1.
Cost of Goods Manufactured

Direct materials:

Raw materials inventory, beginning
$  8,000

Add: Purchases of raw materials
 132,000

Total raw materials available
140,000

Deduct: Raw materials inventory, ending
  10,000

Raw materials used in production

130,000

Direct labor

90,000

Manufacturing overhead applied to work in process inventory

 210,000

Total manufacturing costs

430,000

Add: Beginning work in process inventory

   5,000

435,000

Deduct: Ending work in process inventory

   20,000

Cost of goods manufactured

$415,000

2.
Cost of Goods Sold

Finished goods inventory, beginning
$ 70,000

Add: Cost of goods manufactured
 415,000

Cost of goods available for sale
485,000

Deduct: Finished goods inventory, ending
  25,000

Unadjusted cost of goods sold
460,000

Add: Underapplied overhead
  10,000

Adjusted cost of goods sold
$470,000

3.
Eccles Company
Income Statement

Sales

$643,000
Cost of goods sold ($460,000 + $10,000)

 470,000
Gross margin

173,000
Selling and administrative expenses:...
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