Question

DULILLLL LLL LL LOPULE Il llave been applied to Job #220 if that single rate had been useu! indicated the actual overhead cost of each job? Explain. 24. LO.4 (Cost accumulation in two departments) Country Products manufactures quilt racks. Pine stock is introduced in Department 1, where the raw material is cut and assembled. In Department 2, completed racks are stained and packaged for shipment Department 1 applies overhead on the basis of machine hours; Department 2 applies overhead on the basis of direct labor hours. The company's predetermined overhead rates were computed using the following information: Department 1 Department 2 Expected overhead Expected DLHS $465,000 $380,600 4,000 Expected MHSS 22,000 30,000 2,500

Answer 1

Answer-a:

Pre-determined overhead:

For Department-1 = Expeced overhead / Expected machine hours

                             = $465,000 / 30,000 = $15.50

For Department-2 = Expeced overhead / Expected direct labour hours

                             = $380,600 / 22,000 = $17.30

Answer-b:

Date July Account Raw material Account payable Work in process inventory Raw material Work in process inventory-Dept 1 (285 $11) July July Cash Debit Credit 346,000 346,000 340,000 340,000 3,135 3,135 25,740 25,740 37,200 37,200 24,739 24,739 July July Work in process inventory-Dept 2 (1430 x $18) Cash Work in process inventory-Dept 1 (2400 x $15.50) Manufacturing overhead Work in process inventory-Dept 2 (1430 x $17.30) Manufacturing overhead July

Answer-c:

Calculation of cost and selling price of Job #462 Material cost $ 19,000 Direct labour cost: Department-1 (25 DLH ~ $11) $ 275 Department-2 (158 DLH ~ $18) $ 2,844 $ 3,119 Manufacturing overhead: Department-1 (320 MH $15.50) $ 4,960 Department-2 (158 DLH ~ $17.30) $ 2,733 $ 7,693 Total cost of Job #462 $ 29,812 Margin @20% $ 5,962 Selling price $ 35,775

Cost per unit = $29,812 / 500 = $59.62

Selling price per unit = $35,775 / 500 = $71.55

Raw material cost per unit = $19,000 / 500 = $38