Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania's plant manager has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Xania has the following data for its two departments for the coming year:
Department A |
Department B |
|
Overhead costs (expected) |
$750,000 |
$330,000 |
Normal activity (machine hours) |
6,000 |
10,000 |
Required:
Job 73 Plantwide |
Job 73 Departmental |
Job 74 Plantwide |
Job 74 Departmental |
$$_________________________ over-applied/under-applied (circle one)
$$_________________________ Cost of Goods Sold increased/decreased (circle one)
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Xania Inc. | ||||
Answer 1 | ||||
Calculation of Predetermined OH Rate for the plant | Department A | Department B | Total | Note |
Machine Hours | 6,000.00 | 10,000.00 | 16,000.00 | A |
Overhead costs (expected) | 750,000.00 | 330,000.00 | 1,080,000.00 | B |
Predetermined OH Rate for the plant | 67.50 | C=B/A | ||
Answer 2 | ||||
Calculation of Predetermined OH Rate for each department | Department A | Department B | ||
Machine Hours | 6,000.00 | 10,000.00 | D | |
Overhead costs (expected) | 750,000.00 | 330,000.00 | E | |
Predetermined OH Rate for each department | 125.00 | 33.00 | F=D/E | |
Answer 3 | ||||
Overhead cost assigned to Job 73 | Department A | Department B | Total | |
Machine Hours used | 25.00 | 50.00 | 75.00 | G |
Predetermined OH Rate for the plant | 67.50 | See C | ||
Overhead cost assigned to Job 73 | 5,063.00 | H=G*C | ||
Overhead cost assigned to Job 74 | Department A | Department B | Total | |
Machine Hours used | 40.00 | 15.00 | 55.00 | I |
Predetermined OH Rate for the plant | 67.50 | See C | ||
Overhead cost assigned to Job 74 | 3,713.00 | J=I*C | ||
Answer 4 | ||||
Overhead cost assigned to Job 73 | Department A | Department B | Total | |
Machine Hours used | 25.00 | 50.00 | See G | |
Predetermined OH Rate for the department | 125.00 | 33.00 | See F | |
Overhead cost assigned to Job 73 | 3,125.00 | 1,650.00 | 4,775.00 | K=G*F |
Overhead cost assigned to Job 74 | Department A | Department B | Total | |
Machine Hours used | 40.00 | 15.00 | See I | |
Predetermined OH Rate for the department | 125.00 | 33.00 | See F | |
Overhead cost assigned to Job 74 | 5,000.00 | 495.00 | 5,495.00 | L=I*F |
Answer 5 | ||||
Total Machine Hours | 17,000.00 | M | ||
Predetermined OH Rate for the plant | 67.50 | See C | ||
Applied overhead | 1,147,500.00 | N=M*C | ||
Actual overhead costs | 1,100,000.00 | O | ||
Over applied Overhead | 47,500.00 | P=N-O | ||
Journal Entry | ||||
Account | Debut $ | Credit $ | ||
Overhead costs (Over applied) | 47,500.00 | See P | ||
Cost of Goods Sold | 47,500.00 | See P | ||
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