Question

1. Turco Products uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for September:

	Description	Amount
September 1	Balance	$	27,300
For the month	Direct materials		162,900
For the month	Direct labor		101,600
For the month	Factory overhead		77,216
For the month	To finished goods	(	318,200	)

Turco applies overhead to production at a predetermined rate of 76 percent based on direct labor cost. Job 9-27, the only job still in process at the end of September, has been charged direct labor of $13,400.

Required:

What cost amount of direct materials was charged to Job 9-27?

2. Tom’s Tool & Die uses a predetermined factory overhead rate based on machine-hours. For August, Tom’s budgeted overhead was $328,000 based on a budgeted volume of 41,000 machine-hours. Actual overhead amounted to $317,500 with actual machine-hours totaling 39,500.

Required:

What was over- or underapplied manufacturing overhead in August? (Do not round intermediate calculations.)

3.Marine Components produces parts for airplanes and ships. The parts are produced to specification by their customers, who pay either a fixed price (the price does not depend directly on the cost of the job) or price equal to recorded cost plus a fixed fee (cost plus). For the upcoming year (year 2), Marine expects only two clients (client 1 and client 2). The work done for client 1 will all be done under fixed-price contracts while the work done for client 2 will all be done under cost-plus contracts.

The controller at Marine Components chose direct labor cost as the allocation base in year 2, based on what she considered reflected the relation between overhead and direct labor cost. Year 3 is approaching and again the company only expects two clients: client 1 and client 3. Work for client 1 will continue to be billed using fixed-price contracts, and client 3 will be billed based on cost-plus contracts.

Manufacturing overhead for year 3 is estimated to be $18 million. Other budgeted data for year 3 include:

	Client 1			Client 3
Machine-hours (thousands)		4,800			7,200
Direct labor cost ($000)	$	3,000		$	3,000

Required:

a. Compute the predetermined rate assuming that Marine Components uses machine-hours to apply overhead. (Round your answer to 2 decimal places.)

b. Compute the predetermined rate assuming that Marine Components uses direct labor cost to apply overhead.

Answer 1

1)	Direct materials(balancing figure)				27232
	Direct laboe				13400
	overhead applied				10184
	Ending work in process				50816
	Answer	Direct materials		27,232
2)	Applied overhead		(328000/41000)*39500=			316000
	Actual overhead					317500
	overhead under applied					1500	answer
3)	predetermined overhead using machine hours
	(18*1000000)/(12000*1000)
	1.50	per machine hour
	using direct labor hours
	(18*1000000)/(6000*1000)
	300%	of direct labor cost