Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expected total output of 648,000 units requiring 3,240,000 machine hours. The company is able to schedule production uniformly throughout the year. Machine hours is the cost driver for overhead costs. A total of 64,800 units requiring 275,400 machine hours were produced during May. Actual overhead costs for May amounted to $607,800. The actual costs, as compared to the annual budget and to one-twelfth of the annual budget, are as follows: NEWARK PLASTICS CORPORATION Annual Budget Total Amount Per Unit Per Machine Hour Monthly Budget Actual Costs for May $ 2.90 $0.58 $174,600 $1,879,200 1,231,200 $156,600 102,600 1.90 0.38 102,600 Variable overhead: Indirect material Indirect labor Fixed overhead: Supervision Utilities Depreciation 1,036,800 1.60 0.32 86,400 80,400 1.50 0.30 81,000 99,000 972,000 1,814,400 2.80 0.56 151,200 151,200 Total $6,933,600 $10.70 $2.14 $577,800 $607,800 Required: 1. Prepare a schedule showing the following amounts for Newark Plastics for May. a. Applied overhead costs. b. Variable-overhead spending variance. c. Fixed-overhead budget variance.

Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expected total output of 648,000 units requiring 3,240,000 machine hours. The company is able to schedule production uniformly throughout the year. Machine hours is the cost driver for overhead costs. A total of 64,800 units requiring 275,400 machine hours were produced during May. Actual overhead costs for May amounted to $607,800. The actual costs, as compared to the annual budget and to one-twelfth of the annual budget, are as follows: NEWARK PLASTICS CORPORATION Annual Budget Total Amount Per Unit Per Machine Hour Monthly Budget Actual Costs for May $ 2.90 $0.58 $174,600 $1,879,200 1,231,200 $156,600 102,600 1.90 0.38 102,600 Variable overhead: Indirect material Indirect labor Fixed overhead: Supervision Utilities Depreciation 1,036,800 1.60 0.32 86,400 80,400 1.50 0.30 81,000 99,000 972,000 1,814,400 2.80 0.56 151,200 151,200 Total $6,933,600 $10.70 $2.14 $577,800 $607,800 Required: 1. Prepare a schedule showing the following amounts for Newark Plastics for May. a. Applied overhead costs. b. Variable-overhead spending variance. c. Fixed-overhead budget variance.

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Description: Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expectedtotal output of 648,000 units requiring 3,240,000 machine hours. The company is able to schedule production uniformly throu

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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