Glory Industries manufactures two products: Product X and Product Y. Annual production and sales are 1,500 units of Product X and 1,000 units of Product Y. The company traditionally used direct labor hours as the basis for applying all manufacturing overhead costs to products. Product X requires 0.45 direct labor hours per unit, and Product Y requires 0.60 direct labor hours per unit. The total estimated overhead for the next period is $95,000. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity A, Activity B, and General Factory- with estimated overhead costs and expected activity as follows: Activity Cost Estimated Overhead Expected Product Product Total Pool Cost Activity X Y Activity A $30,000 1,200 500 700 1,200 Activity B $20,000 1,500 800 700 1,500 General Factory $45,000 2,400 1,000 1,400 2,400 Total $95,000 5,100 2,300 2,800 5,100 The predetermined overhead rate under the traditional costing system is

Glory Industries manufactures two products: Product X and Product Y. Annual production and sales are 1,500 units of Product X and 1,000 units of Product Y. The company traditionally used direct labor hours as the basis for applying all manufacturing overhead costs to products. Product X requires 0.45 direct labor hours per unit, and Product Y requires 0.60 direct labor hours per unit. The total estimated overhead for the next period is $95,000. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity A, Activity B, and General Factory- with estimated overhead costs and expected activity as follows: Activity Cost Estimated Overhead Expected Product Product Total Pool Cost Activity X Y Activity A $30,000 1,200 500 700 1,200 Activity B $20,000 1,500 800 700 1,500 General Factory $45,000 2,400 1,000 1,400 2,400 Total $95,000 5,100 2,300 2,800 5,100 The predetermined overhead rate under the traditional costing system is

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 6PB: Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen...

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Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500 machine hours. The cost to make Job 416 is $95 in neon, 15 hours of labor at $13 per hour, and five machine hours. During the month, it incurs $95 in indirect material cost, $130 in administrative labor, $320 in utilities, and $350 in depreciation expense. What is the predetermined overhead rate if machine hours are considered the cost driver? What is the cost of Job 416? What is the overhead incurred during the month?
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Colonels uses a traditional cost system and estimates next years overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is $25 per hour, what is the per-unit cost of each product?
Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven by the estimated 25,000 direct labor hours. It manufactures three products and estimates the following costs: If the labor rate is $30 per hour, what is the per-unit cost of each product?
Cozy, Inc., manufactures small and large blankets. It estimates $950,000 in overhead during the manufacturing of 360,000 small blankets and 120,000 large blankets. What is the predetermined overhead rate if a small blanket takes 2 hours of direct labor and a large blanket takes 3 hours of direct labor?
Moleno Company produces a single product and uses a standard cost system. The normal production volume is 120,000 units; each unit requires 5 direct labor hours at standard. Overhead is applied on the basis of direct labor hours. The budgeted overhead for the coming year is as follows: At normal volume. During the year, Moleno produced 118,600 units, worked 592,300 direct labor hours, and incurred actual fixed overhead costs of 2,150,400 and actual variable overhead costs of 1,422,800. Required: 1. Calculate the standard fixed overhead rate and the standard variable overhead rate. 2. Compute the applied fixed overhead and the applied variable overhead. What is the total fixed overhead variance? Total variable overhead variance? 3. CONCEPTUAL CONNECTION Break down the total fixed overhead variance into a spending variance and a volume variance. Discuss the significance of each. 4. CONCEPTUAL CONNECTION Compute the variable overhead spending and efficiency variances. Discuss the significance of each.
Business Specialty, Inc., manufactures two staplers: small and regular. The standard quantities of direct labor and direct materials per unit for the year are as follows: The standard price paid per pound of direct materials is 1.60. The standard rate for labor is 8.00. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is as follows: The company expects to work 12,000 direct labor hours during the year; standard overhead rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers. Actual operating data for the year are as follows: a. Units produced: small staplers, 35,000; regular staplers, 70,000. b. Direct materials purchased and used: 56,000 pounds at 1.5513,000 for the small stapler and 43,000 for the regular stapler. There were no beginning or ending direct materials inventories. c. Direct labor: 14,800 hours3,600 hours for the small stapler and 11,200 hours for the regular stapler. Total cost of direct labor: 114,700. d. Variable overhead: 607,500. e. Fixed overhead: 350,000. Required: 1. Prepare a standard cost sheet showing the unit cost for each product. 2. Compute the direct materials price and usage variances for each product. Prepare journal entries to record direct materials activity. 3. Compute the direct labor rate and efficiency variances for each product. Prepare journal entries to record direct labor activity. 4. Compute the variances for fixed and variable overhead. Prepare journal entries to record overhead activity. All variances are closed to Cost of Goods Sold. 5. Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total direct materials and direct labor usage variances? Explain.
SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
Crystal Pools estimates overhead will utilize 250,000 machine hours and cost $750,000. It takes 2 machine hours per unit, direct material cost of $14 per unit, and direct labor of $20 per unit. What is the cost of each unit produced?
The cost accountant for River Rock Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning February 1 would be 3,150,000, and total direct labor costs would be 1,800,000. During February, the actual direct labor cost totalled 160,000, and factory overhead cost incurred totaled 283,900. a. What is the predetermined factory overhead rate based on direct labor cost? b. Journalize the entry to apply factory overhead to production for February. c. What is the February 28 balance of the account Factory OverheadBlending Department? d. Does the balance in part (c) represent over- or underapplied factory overhead?
Boarders estimates overhead will utilize 160,000 machine hours and cost $80,000. It takes 4 machine hours per unit, direct material cost of $5 per unit, and direct labor of $5 per unit. What is the cost of each unit produced?
If a factory operates at 100% of capacity one month, 90% of capacity the next month, and 105% of capacity the next month, will a different cost per unit be charged to the work-in-process account each month for factory overhead assuming that a predetermined annual overhead rate is used?