Question

6. Owl Water Bottles was impressed with your work on the previous question and has given you a new ( PCOS task. Its water cooler sells for $9 and uses $2 of direct labor, $3 of direct materials. Overhead is applied as 50% of direct labor dollars. How much gross profit do we make when we sell a cooler? a. $3.00 b. $4.00 C. $5.00 d. Can I get transferred to management so I can hire someone to do this? 7. 92 You were denied your transfer to management. Owl Water Bottles thinks you are not being challenged enough so you are now responsible for analyzing the year end statement. Overhead was debited 10,000 and credited 9,990. What do you do with the $10 difference? a. Close it to miscellaneous expenses b. Close it to COGS C. Round up the credit because it isn't material d. Put $10 in the register and call it a day Abban LOOM Vuoto Chapter 17 1. Owl Snacks expects the following next year: direct materials 30,000; indirect materials 20,000; Snack wrappers salaries 15,000; supervisor salaries 20,000; factory electricity 10,000. If 5,000 machine hours are planned, what is the plantwide overhead rate? a. 16/hour b. 18/hour c. 21/hour d. 10/hour 2000 2. Owl Water Bottles has added a new department for flavored water. Can you calculate the plantwide overhead rate using machine hours as the base? Assume the following: Regular Flavored LUB GOOg Water Water Direct labor hours 30,000 20,000 og suges Machine hours 15,000 DO 10,000 SES MUSIC gits pot Overhead costs 100,000 150,000 on account Log on GP GSM a. Yes, 5/hour b. Yes, 10/hour Nuostabi 2000 c. I'd like to ask the audience 22130 000 d. I'd like to phone a friend

Answer 1

QUESTION 6 :-

CORRECT OPTION IS $4.00 (B)

In accounting, gross profit or sales profit or gross margin is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments. Note that this is different from operating profit.

Therefore, Here Gross Profit = Sales - Direct material - Direct labour.

=$9 - $3 - $2

Gross Profit = $4.

QUESTION 7 :-

CORRECT OPTION IS CLOSE IT TO COGS (B)

Here overhead is over-applied.

That is, If the manufacturing overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during a period, the difference is known as over-applied manufacturing overhead.

At the end of the year, the balance in manufacturing overhead account (over or under-applied manufacturing overhead) is disposed off by either allocating it among work in process, finished goods and cost of goods sold accounts or transferring the entire amount to cost of goods sold account.

So in the given options the most appropriate answer is CLOSE IT TO COGS (B) .

QUESTION 1 :-

CORRECT OPTION IS 10/HOUR (D)

Plant-wide overhead rate is a single rate used to assign or allocate all of a company's manufacturing overhead costs to its production output.

Manufacturing overhead cost includes indirect production cost such as repair and maintenance, depreciation, supervision, electricity charge, etc.

So here, Total manufacturing cost = indirect materials + supervisior salaries + factory electricity

= 20000 + 20000+ 10000

Total manufacturing cost = 50000

   Planned Machine Hours = 5000 hours.

Plant-wide overhead rate    = Total Manufacturing Cost / Planned Machine Hours.

= $ 50000/5000 hour

Plant-wide overhead rate    = $10/ Hour

QUESTION 2 :-

THE CORRECT OPTION IS YES, 10/HOUR (B)

As we discussed above , the defnition of Plant-wide overhead rate clearly mentioned it is a single rate used to assign or allocate all of a company's manufacturing overhead costs to its production output.

Here, Total over head cost for flavored water = Over head cost for Regular water + Overhead cost for flavored water

= 100000 + 150000

Total over head cost for flavored water = 250000

Total Machine Hours taken for flavored water = Machine Hours for Regular water + Machine Hours for Flavored Water

   = 15000 + 10000

Total Machine Hours taken for flavored water = 25000 hours.

So, Plant wide over head rate = Total over head cost for flavored water / Total Machine Hours taken for flavored water

= 250000 / 25000

Plant wide over head rate = 10/hour.