Question

Eagle Co. manufactures bentwood chairs and tables. Wood for both products is steam-bent in the same process, but different types of wood are used for each product. Thus, materials cost is identified separately to each product. One production cyde uses 20 board feet. Labor cost is identified to the process as a whole, as is overhead cost. Data for the month of July, follow: Chairs $3.60 Tables $4.20 10 8 Direct material cost per board foot Number of parts formed per production cyde (20 board feet) Actual operating hours in July Parts produced during July Budgeted annual conversion cost: Labor 120 380 4,000 9,000 Depreciation Other overhead Total $150,000 125,000 65,000 50,000 $390,000 Budgeted anual operating hours for steam-bending 5,200 In your computations, round content amounts to two decimales. If required, round final aniwers to the nearest do 2. Computer terror the benches Previous + 5. 6 7 8. 9 O R T U Р H J K K L 2 V B. N M M

Answer 1

a) July's predetermined rate = Total ovrhead cost /estimated budgeted annual operating hours for steam bonding

=$390,000/5,200

=$75 per hour

b) july's direct material cost

	chairs	Table
Direct material cost per borad feet	$3.60	$4.20
board feets	20	20
number of parts per production cycles	10	8
parts produced during July	4,000	9,000
july's direct material cost	$28,800[$3.60*20/10]*4,000	$94,500[$4.20*20/8]*9000

c) conversion cost

	Chairs	Table
pre determined OH rate	$75	$75
Actual operating hours	120	380
conversion cost	$9,000[$75*120]	$28,500[$75*380]

d) journalize

1		Debit	Credit
	Work in process-chairs	$28,800
	Work in process- Table	$94,500
	Material		$123,300

2		Debit	Credit
	Work in process-chairs	$9,000
	Work in process- Table	$28,500
	Conversions costs applied		$123,300

3		Debit	Credit
	Finished goods -Chairs	$37,800[$28,800+9,000]
	Finished goods-Tables	$123,000[$94,500+$28,500]
	Work in process		$37,800
	Work in process		$123,000
	[ close work in process to finished goods]

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