Management Accounting and Finished Goods

Week 3 : CVP Analysis and Variable Costing - Quiz

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1. (TCO 2) Bubba’s Crawfish Processing Company uses a traditional overhead allocation based on direct labor hours. For the current year overhead is estimated at $2,250,000 and direct labor hours are budgeted at 415,000 hours. Actual overhead was $2,200,000 and actual overhead hours worked were 422,000.

(a) Calculate the predetermined overhead rate.
(b) Calculate the overhead applied.
(c) Determine the amount of overhead that is over/underapplied.
(Points : 6)

(a) Calculate the predetermined overhead rate.
2250000/415000 = 5.4217 per hour
(b) Calculate the overhead applied.
422000 x 5.4217 = 2287952
(c) Determine the amount of overhead that is over/underapplied.
2287952-2200000 = 87952 overapplied | 2. (TCO 2) Thibodeaux Limousine Corporation is trying to determine a predetermined manufacturing overhead. Estimated overhead for the upcoming year is $776,000. Budgeted machine hours are 105,000 hours, and budgeted labor hours are 17,500 hours at a rate of $10.00 per hour. Compute the predetermined overhead rate based on:

(a) Direct labor dollars
(b) Direct labor hours
(c) Machine hours (Points : 6)

Predetermined overhead rate based on machine hours = (776000-175000)/105000 = 5.72 per hour | 3. (TCO 1) List and briefly describe four of the five differences between managerial accounting and financial accounting. (Points : 4)

| 4. (TCO 2)The following information is available for Sappy’s Surgical Shears for the fiscal year ending December 31, 20XX.

Beginning balance in Finished Goods $ 17,000
Ending balance in Finished Goods 15,200
Beginning balance in Work in Process 2,500
Ending balance in Work in Process 1,836
Selling expenses 123,000
General and administrative expenses 89,000
Direct material cost 54,500
Direct labor cost 66,000
Manufacturing overhead 21,400
Sales 385,000