Managerial Accounting
16th Edition
ISBN: 9781259995484
Author: Ray Garrison
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 2.B, Problem 1E
EXERCISE 2B-1
Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty7 woods. The company uses a
The results of a recent month’s operations appear below:
Required:
- Prepare an income statement following the example in Exhibit 2B-1 that records the cost of unused capacity on the income statement as a period expense.
- Why do unused capacity costs arise when the predetermined overhead rate is based on capacity?
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Exa
A company produces garden benches that go through two
departments, department 1A1 and department 2B2, before they are
complete. Expected costs and activities for the two departments are
shown below. Both departments have departmental overhead rates
based on machine hours. Therefore, the overhead rates for
department 1A1 and department 2B2 are the same.
11
010051
Department 1A1
70,000 MH
Department 2B2
60,000 MH
Machine hours
Direct labor hours
56,350 DLH
50,160 DLH
Overhead costs
$225,400
$250,800
True or False
True
False
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
RelyaTech Corporation makes 46,000 tiny wheels to be used in the production of its Beautiful Product. The average cost per tiny wheel at this level of activity
is:
S
$10.50
$9.50
$ 3.95
$ 4.90
Multiple Choice
Help Save & Exit
(ID#13108)
An outside manufacturer, called GreatWheel, recently began producing a comparable tiny wheel that could be used in the Beautiful Product. The price
offered to RelyaTech Corporation to supply them with this tiny wheel is $26.95.
If RelyaTech Corporation decides not to make the wheels, there would be no other use for the production facilities and none of the fixed manufacturing
overhead cost could be avoided.
($87,400)
Direct labor is a variable cost in this company.
Q) What would be the annual financial advantage (disadvantage) for RelyaTech as a result of continuing to make the wheels rather than buying them from the
outside supplier?
Problem A.
Wyoming Company manufactures radios in two different styles:
Radio Model Annual Sales in Units
Starry 10,000
Polka 16,000
Wyoming uses a traditional volume-based costing system in applying factory overhead using direct labor pesos. The unit prime costs of each product were as follows:
Starry Polka
Direct Materials
P38.00
P25.40
Direct labor:
1.2 x P14.60
17.52
0.9 x P14.60
13.14
The predetermined overhead rate was P350% (P1,349,040 ÷ 385,440) Direct labor budget per annual sales:
Starry radio
10,000 x P17.52
P175,200
Polka radio
16,000 x P13.14
210,240
Total
P385,440
Factory overhead:…
Chapter 2 Solutions
Managerial Accounting
Ch. 2.A - EXERCISE 2A-1 Activity-Based Absorption Costing...Ch. 2.A - EXERCISE 2A-2 Activity-Based Absorption Costing as...Ch. 2.A - EXERCISE 2A-3 Activity-Based Absorption Costing as...Ch. 2.A - PROBLEM 2A-4 Activity-Based Absorption Costing as...Ch. 2.A - Prob. 5PCh. 2.A -
CASE 2A-6 Activity-Based Absorption Costing and...Ch. 2.B - EXERCISE 2B-1 Overhead Rate Based on Capacity...Ch. 2.B - EXERCISE 2B-2 Overhead Rates and Capacity Issues...Ch. 2.B - Prob. 3PCh. 2.B - Prob. 4C
Ch. 2 - Prob. 1QCh. 2 - What is absorption costing?Ch. 2 - What is normal costing?Ch. 2 - How is the unit product cost of a job calculated?
Ch. 2 - Explain the four-step process used to compute a...Ch. 2 - What is the purpose of the job cost sheet in a...Ch. 2 - Explain why some production costs must be assigned...Ch. 2 - Why do companies use predetermined overhead rates...Ch. 2 - What factors should be considered in selecting an...Ch. 2 - If a company fully allocates all of its overhead...Ch. 2 - Would you expect the amount of applied overhead...Ch. 2 - Prob. 12QCh. 2 - What is a plantwide overhead rate? Whyare multiple...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 3AECh. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 1F15Ch. 2 - Prob. 2F15Ch. 2 - Prob. 3F15Ch. 2 - Prob. 4F15Ch. 2 - Prob. 5F15Ch. 2 - Prob. 6F15Ch. 2 - Prob. 7F15Ch. 2 - Prob. 8F15Ch. 2 - Prob. 9F15Ch. 2 - Prob. 10F15Ch. 2 - Prob. 11F15Ch. 2 - Sweeten Company had no jobs in progress at the...Ch. 2 - Prob. 13F15Ch. 2 - Prob. 14F15Ch. 2 - Prob. 15F15Ch. 2 - EXERCISE 2-1 Compute a Predetermined Overhead Rate...Ch. 2 - Prob. 2ECh. 2 - EXERCISE 2–3 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 24 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 2-5 Computing Total Job Costs and Unit...Ch. 2 - Prob. 6ECh. 2 - EXERCISE 2-7 Job-Order Costing; Working Backwards...Ch. 2 - EXERCISE 2-8 Applying Overhead Cost; Computing...Ch. 2 - EXERCISE 2–9 Job-Order Costing and Decision Making...Ch. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - EXERCISE 2—13 Departmental Predetermined Overhead...Ch. 2 - EXERCISE 214 Job-Orders Costing for a Service...Ch. 2 - Prob. 15ECh. 2 - PROBLEM 2—16 Plantwide Predetermined Overhead...Ch. 2 - PROBLEM 217 Plantwide and Departmental...Ch. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - PROBLEM 2-21 Plant wide Versus Multiple...Ch. 2 - CASE 2-22 Plantwide versus Departmental Overhead...
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