Windsor Company uses activity-based costing to determine product costs. Some of the entries have been completed to the manufacturing overhead account for the current year, as shown by entry (a) below: Manufacturing Overhead (a) 2,341,000 Required: 1. What does entry (a) represent? multiple choice Machine-hours Actual manufacturing overhead cost incurred Overhead applied 2. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Estimated Overhead Cost Expected Activity Labour related Direct labour-hours $ 585,000 39,000 DLHs Purchase orders Number of orders 46,500 1,500 orders Parts management Number of part types 357,000 403 part types Board etching Number of boards 450,000 1,990 boards General factory Machine-hours 656,910 81,100 MHs Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools. (Note: Round your final answers to 1 decimal place). Activity Cost Pool Actual Activity Labour Related _____per direct labour hours Purchase Orders _____per order Parts Management _____per part type Board Etching _____per board General Factory _____per machine hours 3. During the year, actual activity was recorded as follows: Activity Cost Pool Actual Activity Labour related 41,000 DLHs Purchase orders 1,320 orders Parts management 424 part types Board etching 2,120 boards General factory 82,700 MHs Determine the amount of manufacturing overhead cost applied to production for the year. (Note: Round intermediate calculations to 1 decimal place and final answers to the nearest whole dollar amount). Activity Cost Pool Applied Overhead Labour Related Purchase Orders Parts Management Board Etching General Factory Total 4. Determine the amount of underapplied or overapplied overhead cost for the year. (Note: Round intermediate calculations to 1 decimal place and final answers to the nearest whole dollar amount). ______overhead cost________
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Windsor Company uses activity-based costing to determine product costs. Some of the entries have been completed to the manufacturing
| Manufacturing Overhead | |||
| (a) | 2,341,000 | ||
Required:
1. What does entry (a) represent?
multiple choice
-
Machine-hours
-
Actual
manufacturing overhead cost incurred -
Overhead applied
2. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:
| Activity Cost Pool | Activity Measure | Estimated Overhead Cost |
Expected Activity | |||
| Labour related | Direct labour-hours | $ | 585,000 | 39,000 | DLHs | |
| Purchase orders | Number of orders | 46,500 | 1,500 | orders | ||
| Parts management | Number of part types | 357,000 | 403 | part types | ||
| Board etching | Number of boards | 450,000 | 1,990 | boards | ||
| General factory | Machine-hours | 656,910 | 81,100 | MHs | ||
Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools. (Note: Round your final answers to 1 decimal place).
| Activity Cost Pool | Actual Activity |
| Labour Related | _____per direct labour hours |
| Purchase Orders | _____per order |
| Parts Management | _____per part type |
| Board Etching | _____per board |
| General Factory | _____per machine hours |
3. During the year, actual activity was recorded as follows:
| Activity Cost Pool | Actual Activity | |
| Labour related | 41,000 | DLHs |
| Purchase orders | 1,320 | orders |
| Parts management | 424 | part types |
| Board etching | 2,120 | boards |
| General factory | 82,700 | MHs |
Determine the amount of manufacturing overhead cost applied to production for the year. (Note: Round intermediate calculations to 1 decimal place and final answers to the nearest whole dollar amount).
| Activity Cost Pool | Applied Overhead |
| Labour Related | |
| Purchase Orders | |
| Parts Management | |
| Board Etching | |
| General Factory | |
| Total |
4. Determine the amount of underapplied or overapplied overhead cost for the year. (Note: Round intermediate calculations to 1 decimal place and final answers to the nearest whole dollar amount).
______overhead cost________
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