Question

XYZ Company applies overhead to jobs using direct labor cost as an activity. For the current year, XYZ's estimated overhead was $250,000 whlle the actual overhead cost totaled $265,000. XYZ's estimated direct labor cost was $500,000 and the actual direct labor cost amounted to $510,000. For the current year, overhead was: O under-applied by $10,000 O under-applied by $15,000 O under-applied by $20,000 O under-applied by $25,000 O over-applied by $10,000 O over-applied by $15,000 Oover-applied by $20,000 Oover-applied by $25,000 none of the above are correct

Answer 1

Answer is given below

Q.No.1 Answer is Option A) Under-applied by $10,000 Predetermined Rate Total Estimate Overhead Total Estimate Labor cost $250,000 $500,000 50% Actual Direct Labor cost $510,000 Applied Overhead Actual Overhead Under-applied Overhead $255,000 $265,000 $10,000 Q.No.2 Total Sales= Variable Cost+Fixed Cost + Profit Variable Cost Contribution margin Selling price $43.20 $28.30 $71.50 Let Units be x 71.5 x= 43.2x +$833,220 +18% of 71.5 x solving above equation 15.43x = $ 833,220 x = 54,000 Units Cross checking Sales Variable cost Contribution Margin Fixed Cost Profit $3,861,000 $2,332,800 $1,528,200 $833,200 $695,000 Profit as % of Sales 18.00% Q.No.3 Net Income in 2019 Sales Variable Cost Contribution Fixed Cost Net Profit $2,717,000 $1,641,600 $1,075,400 $833,220 $242,180 Selling price Revised Variable cost Revised Contribution $71.50 $40.45 $31.05 Fixed cost Increase in Fixed cost Total Fixed Cost Profit of 2019 Total Target needed $833,220 $33,085 $866,305 $242,180 $1,108,485 Units Units needed to achieved above target Total Target $1,108,485 Revised Contribution per unit) $31.05 35,700 Cross checking Sales Variable Cost Contribution Fixed Cost Net Profit $2,552,550 $1,444,065 $1,108,485 $866,305 $242,180