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Cherokee Inc. is a merchandiser that provided the following information:
Amount
Number of units sold
13,000
Selling price per unit
$
16
Variable selling expense per unit
$
1
Variable administrative expense per unit$
2
Total fixed selling expense
$19,000
Total fixed administrative expense
$13,000
Beginning merchandise inventory
$11,000
Ending merchandise inventory
$25,000
Merchandise purchases
$85,000
Required:
1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.
Garrison 16e Rechecks 2017-06-15
Explanation
1.
Sales: ($16 per unit × 13,000 units) = $208,000
Cost of goods sold: ($11,000 + $85,000 – $25,000) = $71,000
Selling expenses: (($1 per unit × 13,000 units) + $19,000) = $32,000
Administrative expenses: (($2 per unit × 13,000 units) + $13,000) = $39,000
2.
Cost of goods sold: ($11,000 + $85,000 – $25,000) = $71,000
Selling expenses: ($1 per unit × 13,000 units) = $13,000
Administrative expenses: ($2 per unit × 13,000 units) = $26,000
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Kubin Company’s relevant range of production is 25,000 to 33,500 units. When it
produces and sells 29,250 units, its average costs per unit are as follows:
Amount per Unit
Direct materials
$ 8.50
Direct labor
$ 5.50
Variable manufacturing overhead $ 3.00
Fixed manufacturing overhead $ 6.50
Fixed selling expense
$ 5.00
Fixed administrative expense
$ 4.00
Sales commissions
$ 2.50
Variable administrative expense $ 2.00
Required:
1. What is the incremental manufacturing cost incurred if the company increases
production from 29,250 to 29,251 units?
2. What is the incremental cost incurred if the company increases production and sales
from 29,250 to 29,251 units?
3. Assume that Kubin Company produced 29,250 units and expects to sell 28,900 of
them. If a new customer unexpectedly emerges and expresses interest in buying the
350 extra units that have been produced by the company and that would otherwise
remain unsold, what is the incremental manufacturing cost per unit incurred to sell
these units to the customer?
4. Assume that Kubin Company produced 29,250 units and expects to sell 28,900 of
them. If a new customer unexpectedly emerges and expresses interest in buying the
350 extra units that have been produced by the company and that would otherwise
remain unsold, what incremental selling and administrative cost per unit is incurred to
sell these units to the customer?
Explanation
3.
Because the 350 units to be sold to the new customer have already been produced, the incremental
manufacturing cost per unit is zero. The variable manufacturing costs incurred to make these units have
already been incurred and, as such, are sunk costs.
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The Devon Motor Company produces automobiles. On April 1st the company had no
beginning inventories and it purchased 6,070 batteries at a cost of $85 per battery. It
withdrew 5,600 batteries from the storeroom during the month. Of these, 100 were
used to replace batteries in cars being used by the company’s traveling sales staff. The
remaining 5,500 batteries withdrawn from the storeroom were placed in cars being
produced by the company. Of the cars in production during April, 90 percent were
completed and transferred from work in process to finished goods. Of the cars
completed during the month, 30 percent were unsold at April 30th.
Required:
1. Determine the cost of batteries that would appear in each of the following accounts
on April 30th.
Explanation
1a.
The cost of batteries in Raw Materials:
Beginning raw materials inventory
Plus: Battery purchases
Batteries available
Minus: Batteries withdrawn
Ending raw materials inventory (a)
Cost per battery (b)
Raw materials on April 30th (a) × (b)
0
6,070
6,070
5,600
470
$
85
$39,950
1b.
The cost of batteries in Work in Process:
Beginning work in process inventory
Plus: Batteries withdrawn for production
Batteries available
Minus: Batteries transferred to finished goods (5,500 × 90%)
Ending work in process inventory (a)
Cost per battery (b)
Work in process on April 30th (a) × (b)
0
5,500
5,500
4,950
550
$
85
$46,750
1c.
The cost of batteries in Finished Goods:
Beginning finished goods inventory
Plus: Batteries transferred in from work in process (see requirement b)
Batteries available
Minus: Batteries transferred out to cost of goods sold (4,950 × (100% ‒ 30%))
Ending finished goods inventory (a)
Cost per battery (b)
Finished goods on April 30th (a) × (b)
1d.
The cost of batteries in Cost of Goods Sold:
Number of batteries (see requirement c) (a)
3,465
Cost per battery (b)
$
85
Cost of goods sold for April (a) × (b)
$294,525
1e.
The cost of batteries included in selling expense:
Number of batteries (a)
Cost per battery (b)
Selling expense for April (a) × (b)
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100
$ 85
$8,500
0
4,950
4,950
3,465
1,485
$
85
$126,225
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Fickel Company has two manufacturing departments—Assembly and Testing &
Packaging. The predetermined overhead rates in Assembly and Testing & Packaging
are $15.00 per direct labor-hour and $11.00 per direct labor-hour, respectively. The
company’s direct labor wage rate is $18.00 per hour. The following information
pertains to Job N-60:
Direct materials
Direct labor
Assembly
$ 360
$ 117
Testing &
Packaging
$ 33
$ 45
Required:
1. What is the total manufacturing cost assigned to Job N-60? (Do not round
intermediate calculations.)
2. If Job N-60 consists of 10 units, what is the unit product cost for this job? (Do not
round intermediate calculations. Round your answer to 2 decimal places.)
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Explanation
1 & 2.
The total direct labor-hours required for Job N-60:
Direct labor cost (a)
Direct labor wage rate per hour (b)
Total direct labor hours (a) ÷ (b)
Assembly
$ 117
$ 18
6.5
Testing & Packaging
$
45
$
18
2.5
The total manufacturing cost and unit product cost for Job N-60 is computed as follows:
Assembly
Direct materials ($360 + $33)
Direct labor ($117 + $45)
Assembly Department
($15 per DLH × 6.5 DLHs)
Testing & Packaging Department
($11 per DLH × 2.5 DLHs)
Total manufacturing cost
Total manufacturing cost (a)
Number of units in the job (b)
Unit product cost (a) ÷ (b)
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$97.50
27.50
$
125
680
$
680
10
$ 68.00
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Packaging
$ 393
162
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Tech Solutions is a consulting firm that uses a job-order costing system. Its direct
materials consist of hardware and software that it purchases and installs on behalf of
its clients. The firm’s direct labor includes salaries of consultants that work at the
client’s job site, and its overhead consists of costs such as depreciation, utilities, and
insurance related to the office headquarters as well as the office supplies that are
consumed serving clients.
Tech Solutions computes its predetermined overhead rate annually on the basis of
direct labor-hours. At the beginning of the year, it estimated that 72,500 direct laborhours would be required for the period’s estimated level of client service. The
company also estimated $652,500 of fixed overhead cost for the coming period and
variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for
the year was $671,800 and its actual total direct labor was 77,550 hours.
Required:
1. Compute the predetermined overhead rate.
2. During the year, Tech Solutions started and completed the Xavier Company
engagement. The following information was available with respect to this job:
Direct materials
Direct labor cost
Direct labor hours worked
$ 43,500
$ 23,400
300
Compute the total job cost for the Xavier Company engagement.
Garrison 16e Rechecks 2017-06-15, 2017-08-08
Explanation
1.
The estimated total overhead cost is computed as follows:
Y = $652,500 + ($0.50 per DLH)(72,500 DLHs)
Estimated fixed overhead cost
$652,500
Estimated variable overhead cost: $0.50 per DLH ×
72,500 DLHs
36,250
Estimated total overhead cost
$688,750
The predetermined overhead rate is computed as follows:
Estimated total overhead (a)
Estimated total direct labor-hours (b)
Predetermined overhead rate (a) ÷ (b)
$ 688,750
72,500 DLHs
$
9.50 per DLH
2.
Overhead applied ($9.50 per DLH × 300 DLHs) = $2,850
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Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job
V, which was started and completed during the current period, shows charges of
$6,000 for direct materials, $10,000 for direct labor, and $6,600 for overhead on its
job cost sheet. Job W, which is still in process at year-end, shows charges of $3,100
for direct materials and $4,900 for direct labor.
Required:
1a. Should any overhead cost be applied to Job W at year-end?

Yes

No
1b. How much overhead cost should be applied to Job W?
2. How will the costs included in Job W’s job cost sheet be reported within Sigma
Corporation’s financial statements at the end of the year?

Raw Materials

Work-in-Process

Finished Goods
Explanation
1.
Yes, overhead should be applied to Job W at year-end.
Because $6,600 of overhead was applied to Job V on the basis of $10,000 of direct labor cost, the company’s
predetermined overhead rate must be 66% of direct labor cost.
Job W direct labor cost (a)
Predetermined overhead rate (b)
Manufacturing overhead applied to Job W (a) × (b)
$
$
4,900
0.66
3,234
2.
The direct materials ($3,100), direct labor ($4,900), and applied overhead ($3,234) for Job W will be included
in Work in Process on Sigma Corporation’s balance sheet.
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Larned Corporation recorded the following transactions for the just completed month.
a. $86,000 in raw materials were purchased on account.
b. $84,000 in raw materials were used in production. Of this
amount, $72,000 was for direct materials and the remainder was
for indirect materials.
c. Total labor wages of $129,000 were paid in cash. Of this amount,
$102,100 was for direct labor and the remainder was for indirect
labor.
d. Depreciation of $199,000 was incurred on factory equipment.
Required:
Record the above transactions in journal entries. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.)
Explanation
No further explanation details are available for this problem.
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Osborn Manufacturing uses a predetermined overhead rate of $20.00 per direct laborhour. This predetermined rate was based on a cost formula that estimates $276,000 of
total manufacturing overhead for an estimated activity level of 13,800 direct laborhours.
The company actually incurred $275,000 of manufacturing overhead and 13,300
direct labor-hours during the period.
Required:
1. Determine the amount of underapplied or overapplied manufacturing overhead for
the period.
2. Assume that the company's underapplied or overapplied overhead is closed to Cost
of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied
overhead increase or decrease the company’s gross margin? By how much?
Explanation
1.
Manufacturing overhead incurred (a)
$
275,000
Actual direct labor-hours
× Predetermined overhead rate
= Manufacturing overhead applied (b)
$
$
13,300
20.00
266,000
Manufacturing overhead underapplied (a) − (b)
$
9,000
2.
Because manufacturing overhead is underapplied, the journal entry would increase cost of goods sold by
$9,000 and the gross margin would decrease by $9,000.
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The following cost data relate to the manufacturing activities of Chang Company
during the just completed year:
Manufacturing overhead costs incurred:
Indirect materials
Indirect labor
$
15,700
137,000
Property taxes, factory
Utilities, factory
Depreciation, factory
Insurance, factory
Total actual manufacturing overhead costs incurred
Other costs incurred:
Purchases of raw materials (both direct and indirect)
Direct labor cost
Inventories:
Raw materials, beginning
Raw materials, ending
Work in process, beginning
Work in process, ending
$
8,700
77,000
270,900
10,700
520,000
$
$
407,000
67,000
$
$
$
$
20,700
30,700
40,700
70,700
The company uses a predetermined overhead rate of $26 per machine-hour to apply
overhead cost to jobs. A total of 20,400 machine-hours were used during the year.
Required:
1. Compute the amount of underapplied or overapplied overhead cost for the year.
2. Prepare a schedule of cost of goods manufactured for the year.
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Explanation
1.
Actual manufacturing overhead costs (a)
Manufacturing overhead cost applied:
20,400 MH × $26 per MH (b)
Overapplied overhead cost (a) − (b)
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

$ 520,000
530,400
$(10,400)
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During the month of May, direct labor cost totaled $8,250 and direct
labor cost was 25% of prime cost. If total manufacturing costs during
May were $79,500, the manufacturing overhead was:
Multiple Choice

$24,750

$33,000

$71,250

$46,500
Correct
Explanation
Direct labor cost = $8,250
Direct labor cost = 0.25 × Prime cost
Total manufacturing cost = $79,500
Direct labor cost = 0.25 × Prime cost
Prime cost = Direct labor cost ÷ 0.25
Prime cost = $8,250 ÷ 0.25 = $33,000
Total manufacturing cost = Prime cost + Manufacturing overhead cost
$79,500 = $33,000 + Manufacturing overhead cost
Manufacturing overhead cost = $46,500
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Paolucci Corporation's relevant range of activity is 8,700 units to 17,500 units. When
it produces and sells 13,100 units, its average costs per unit are as follows:
Average
Cost per Unit
Direct materials
$
7.15
Direct labor
$
4.05
Variable manufacturing overhead $
2.05
Fixed manufacturing overhead
$
3.80
Fixed selling expense
$
1.35
Fixed administrative expense
$
0.65
Sales commissions
$
1.30
Variable administrative expense $
0.55
If 12,100 units are sold, the variable cost per unit sold is closest to:
Multiple Choice

$20.90

$13.25

$17.05

$15.10
Correct
Explanation
Direct materials
$ 7.15
Direct labor
4.05
Variable manufacturing overhead 2.05
Sales commissions
1.30
Variable administrative expense
0.55
Variable cost per unit sold
$15.10
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Haack Inc. is a merchandising company. Last month the company's cost
of goods sold was $61,900. The company's beginning merchandise
inventory was $17,600 and its ending merchandise inventory was
$26,200. What was the total amount of the company's merchandise
purchases for the month?
Multiple Choice

$61,900

$53,300

$70,500
Correct

$105,700
Explanation
Cost of goods sold = Beginning merchandise inventory + Purchases – Ending merchandise inventory
$61,900 = $17,600 + Purchases – $26,200
Purchases = $61,900 – $17,600 + $26,200 = $70,500
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Schwiesow Corporation has provided the following information:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Sales commissions
Variable administrative expense
Fixed selling and administrative expense
Cost per
Unit
$ 7.80
$ 3.80
$ 1.40
$
$
Cost per
Period
$
13,500
$
6,400
1.00
0.70
If 4,500 units are produced, the total amount of manufacturing overhead cost is closest
to:
Multiple Choice

$15,300

$19,800
Correct

$12,150

$26,200
Explanation
Total variable manufacturing overhead cost
($1.40 per unit x 4,500 units)
Total fixed manufacturing overhead cost
Total manufacturing overhead cost (a)
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13,500
$19,800
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Pedregon Corporation has provided the following information:
Cost per
Unit
$ 7.05
$ 3.70
$ 1.30
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Sales commissions
Variable administrative expense
Fixed selling and administrative expense
$11,900
$ 0.50
$ 0.60
$ 3,600
If 3,500 units are sold, the total variable cost is closest to:
Multiple Choice

$52,325

$59,675

$46,025
Correct

$42,175
Explanation
Direct materials
Direct labor
Variable manufacturing overhead
Cost per Period
$ 7.05
3.70
1.30
Sales commissions
Variable administrative expense
Variable cost per unit sold
0.50
0.60
$13.15
Variable cost per unit sold (a)
Number of units sold (b)
Total variable costs (a) x (b)
$ 13.15
3,500
$46,025
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At a sales volume of 36,500 units, Choice Corporation's sales commissions (a cost
that is variable with respect to sales volume) total $576,700.
To the nearest whole dollar, what should be the total sales commissions at a sales
volume of 35,000 units? (Assume that this sales volume is within the relevant
range.) (Round intermediate calculations to 2 decimal places.)
Garrison 16e Rechecks 2017-06-22, 2017-08-01
Multiple Choice

$564,520

$576,700

$553,000
Correct

$601,416
Explanation
Sales commission per unit = Total sales commissions ÷ Unit sales = $576,700 ÷ 36,500 = $15.80
Total sales commission = Sales commission per unit × Unit sales = $15.80 × 35,000 = $553,000
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An income statement for Sam's Bookstore for the first quarter of the year is presented
below:
Sam's Bookstore
Income Statement
For Quarter Ended March 31
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Selling
Administration
Net operating income
$ 910,000
645,000
265,000
$ 103,000
110,000
213,000
$ 52,000
On average, a book sells for $65. Variable selling expenses are $6 per book with the
remaining selling expenses being fixed. The variable administrative expenses are 5%
of sales with the remainder being fixed.
The cost formula for selling and administrative expenses with "X" equal to the
number of books sold is:
Multiple Choice

Y = $97,500 + $6.00X

Y = $97,500 + $9.25X

Y = $83,500 + $9.25X
Correct

Y = $83,500 + $12.50X
Explanation
Unit sales = $910,000 ÷ $65 per book = 14,000 books
Selling expenses = Fixed selling expenses + ($6 per book x 14,000 books)
$103,000 = Fixed selling expenses + $84,000
Fixed selling expenses = $103,000 − $84,000 = $19,000
Administrative expenses = Fixed administrative expenses + (0.05 x $910,000)
$110,000 = Fixed administrative expenses + $45,500
Fixed administrative expenses = $110,000 − $45,500 = $64,500
Variable administrative expense per unit = 0.05 x $65 per book = $3.25 per book
Y = ($19,000 + $64,500) + ($6 + $3.25) X
Y = $83,500 + $9.25X
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Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it
produces and sells 5,400 units, its average costs per unit are as follows:
Average
Cost per Unit
Direct materials
$ 5.30
Direct labor
$ 3.55
Variable manufacturing overhead
$ 1.60
Fixed manufacturing overhead
$ 4.00
Fixed selling expense
$ 0.70
Fixed administrative expense
$ 0.55
Sales commissions
$ 0.45
Variable administrative expense
$ 0.45
Required:
a. For financial reporting purposes, what is the total amount of product costs incurred
to make 5,400 units?
b. For financial reporting purposes, what is the total amount of period costs incurred
to sell 5,400 units?
c. If 6,400 units are sold, what is the variable cost per unit sold? (Round "Per unit"
answer to 2 decimal places.)
d. If 6,400 units are sold, what is the total amount of variable costs related to the units
sold?
e. If 6,400 units are produced, what is the average fixed manufacturing cost per unit
produced? (Round "Per unit" answer to 2 decimal places.)
f. If 6,400 units are produced, what is the total amount of fixed manufacturing cost
incurred?
g. If 6,400 units are produced, what is the total amount of manufacturing overhead
cost incurred? What is this total amount expressed on a per unit basis? (Round "Per
unit" answer to 2 decimal places.)
h. If the selling price is $22.80 per unit, what is the contribution margin per unit
sold? (Round "Per unit" answer to 2 decimal places.)
i. If 4,400 units are produced, what is the total amount of direct manufacturing cost
incurred?
j. If 4,400 units are produced, what is the total amount of indirect manufacturing cost
incurred?
k. What incremental manufacturing cost will the company incur if it increases
production from 5,400 to 5,401 units? (Round "Per unit" answer to 2 decimal
places.)
Explanation
a.
Direct materials
$
5.30
Direct labor
3.55
Variable manufacturing overhead
1.60
Variable manufacturing cost per unit
$
Total variable manufacturing cost
($10.45 per unit x 5,400 units produced)
$ 56,430
Total fixed manufacturing overhead cost
($4.00 per unit x 5,400 units produced)
Total product (manufacturing) cost
10.45
21,600
$ 78,030
b.
Sales commissions
$
0.45
Variable administrative expense
0.45
Variable selling and administrative expense per unit
$
0.90
Total variable selling and administrative expense
($0.90 per unit x 5,400 units sold)
$
4,860
Total fixed selling and administrative expense
($0.70 per unit x 5,400 units + $0.55 per unit x 5,400 units)
Total period (nonmanufacturing) cost
$ 11,610
c.
Direct materials
$ 5.30
Direct labor
3.55
Variable manufacturing overhead
1.60
Sales commissions
0.45
Variable administrative expense
0.45
Variable cost per unit sold
$ 11.35
d.
Variable cost per unit sold (a)
Number of units sold (b)
Total variable costs (a) x (b)
e.
6,750
$
11.35
6,400
$ 72,640
Total fixed manufacturing overhead cost
($4.00 per unit x 5,400 units*) (a)
$21,600
Number of units produced (b)
6,400
Average fixed manufacturing cost per unit produced (a) ÷ (b)
$
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed
manufacturing overhead cost by 5,400 units.
f.
Fixed manufacturing overhead per unit
Number of units produced
Total fixed manufacturing overhead cost
$
4.00
5,400
$ 21,600
g.
Total variable manufacturing overhead cost
($1.60 per unit x 6,400 units)
$ 10,240
Total fixed manufacturing overhead cost
($4.00 per unit x 5,400 units*)
Total manufacturing overhead cost (a)
21,600
$ 31,840
Number of units produced (b)
Manufacturing overhead per unit (a) ÷ (b)
6,400
$
4.98
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed
manufacturing overhead cost by 5,400 units.
h.
3.38
Selling price per unit
Direct materials
$ 22.80
$ 5.30
Direct labor
3.55
Variable manufacturing overhead
1.60
Sales commissions
0.45
Variable administrative expense
0.45
Variable cost per unit sold
Contribution margin per unit
11.35
$ 11.45
i.
Direct materials
$
5.30
Direct labor
Direct manufacturing cost per unit (a)
3.55
$
8.85
Number of units produced (b)
Total direct manufacturing cost (a) × (b)
4,400
$ 38,940
j.
Total variable manufacturing overhead cost
($1.60 per unit x 4,400 units)
Total fixed manufacturing overhead cost
($4.00 per unit x 5,400 units*)
Total indirect manufacturing cost
$
7,040
21,600
$ 28,640
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed
manufacturing overhead cost by 5,400 units.
k.
Direct materials
$
5.30
Direct labor
3.55
Variable manufacturing overhead
1.60
Incremental manufacturing cost
$ 10.45
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An income statement for Sam's Bookstore for the first quarter of the year is presented
below:
Sam's Bookstore
Income Statement
For Quarter Ended March 31
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Selling
Administration
Net operating income
$ 910,000
565,000
345,000
$ 120,000
144,000
264,000
$ 81,000
On average, a book sells for $70. Variable selling expenses are $5 per book with the
remaining selling expenses being fixed. The variable administrative expenses are 4%
of sales with the remainder being fixed.
The contribution margin for Sam's Bookstore for the first quarter is:
Multiple Choice

$280,000

$808,600

$243,600
Correct

$666,400
Explanation
Unit sales = $910,000 ÷ $70 per book = 13,000 books
Sales
Variable expenses:
Cost of goods sold
Variable selling ($5 per book × 13,000 books)
Variable administrative (4% of $910,000)
$910,000
$565,000
65,000
36,400 666,400
Contribution margin
$243,600
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Management of Plascencia Corporation is considering whether to purchase a new
model 370 machine costing $525,000 or a new model 220 machine costing $423,000
to replace a machine that was purchased 8 years ago for $488,000. The old machine
was used to make product I43L until it broke down last week. Unfortunately, the old
machine cannot be repaired.
Management has decided to buy the new model 220 machine. It has less capacity than
the new model 370 machine, but its capacity is sufficient to continue making product
I43L.
Management also considered, but rejected, the alternative of simply dropping product
I43L. If that were done, instead of investing $340,000 in the new machine, the money
could be invested in a project that would return a total of $450,000.
In making the decision to invest in the model 220 machine, the opportunity cost was:
Multiple Choice

$488,000

$423,000

$525,000

$450,000
Correct
Explanation
Opportunity cost = Return from alternative investment = $450,000
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Gilchrist Corporation bases its predetermined overhead rate on the estimated machinehours for the upcoming year. At the beginning of the most recently completed year,
the Corporation estimated the machine-hours for the upcoming year at 64,900
machine-hours. The estimated variable manufacturing overhead was $4.97 per
machine-hour and the estimated total fixed manufacturing overhead was $1,858,087.
The predetermined overhead rate for the recently completed year was closest to:
Multiple Choice

$33.60 per machine-hour
Correct

$32.60 per machine-hour

$4.97 per machine-hour

$28.63 per machine-hour
Explanation
Estimated total manufacturing overhead = $1,858,087 + ($4.97 per machine-hour × 64,900 machine-hours) =
$2,180,640
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the
allocation base = $2,180,640 ÷ 64,900 machine-hours = $33.60 per machine-hour
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Brothern Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. Data for the most recently completed year
appear below:
Estimates made at the beginning of the year:
Estimated machine-hours
Estimated variable manufacturing overhead
Estimated total fixed manufacturing overhead
Actual machine-hours for the year
37,800
$
5.91 per ma
$ 795,690
34,000
The predetermined overhead rate for the recently completed year was closest to:
Multiple Choice

$26.37 per machine-hour

$26.96 per machine-hour
Correct

$5.91 per machine-hour

$21.05 per machine-hour
Explanation
Estimated total manufacturing overhead = $795,690 + ($5.91 per machine-hour × 37,800 machine-hours) =
$1,019,088
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the
allocation base = $1,019,088 ÷ 37,800 machine-hours = $26.96 per machine-hour
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Dehner Corporation uses a job-order costing system with a single plantwide
predetermined overhead rate based on direct labor-hours. The company based its
predetermined overhead rate for the current year on the following data:
Total direct labor-hours
Total fixed manufacturing overhead cost
Variable manufacturing overhead per direct labor-hour
107,000
$406,600
$
5.00
Recently, Job P951 was completed with the following characteristics:
Number of units in the job
Total direct labor-hours
Direct materials
Direct labor cost
100
100
$ 800
$10,700
The total job cost for Job P951 is closest to: (Round your intermediate calculations
to 2 decimal places.)
Garrison 16e Rechecks 2017-06-22, 2017-08-01
Multiple Choice

$11,580

$11,500

$1,680

$12,380
Correct
Explanation
Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated
variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) =
$406,600 + ($5.00 per direct labor-hour × 107,000 direct labor-hours) = $406,600 + $535,000 = $941,600
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the
allocation base = $941,600 ÷ 107,000 direct labor-hours = $8.80 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred
by the job = $8.80 per direct labor-hour × 100 direct labor-hours = $880
Direct materials
Direct labor
Manufacturing overhead applied
Total cost of Job P951
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$
800
10,700
880
$12,380
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Opunui Corporation has two manufacturing departments--Molding and Finishing. The
company used the following data at the beginning of the year to calculate
predetermined overhead rates:
Estimated total machine-hours (MHs)
Estimated total fixed manufacturing overhead cost
Estimated variable manufacturing overhead cost per MH
Molding
3,250
$10,000
$ 2.50
During the most recent month, the company started and completed two jobs--Job A
and Job M. There were no beginning inventories. Data concerning those two jobs
follow:
Direct materials
Direct labor cost
Molding machine-hours
Finishing machine-hours
Job A
$16,400
$23,400
1,250
1,250
Job M
$10,200
$10,000
2,000
500
Finishin
3,300
$5,100
$ 5.00
Assume that the company uses a plantwide predetermined manufacturing overhead
rate based on machine-hours and uses a markup of 40% on manufacturing cost to
establish selling prices. The calculated selling price for Job A is closest to: (Round
your intermediate calculations to 2 decimal places.)
Garrison 16e Rechecks 2017-06-28, 2017-09-05
rev: 09_06_2017_QC_CS-97960
Multiple Choice

$54,950

$76,930
Correct

$94,675

$21,980
Explanation
The first step is to calculate the estimated total overhead costs in the two departments.
Molding
Estimated fixed manufacturing overhead
Estimated variable manufacturing overhead ($2.50 per MH × 3,250 MHs)
Estimated total manufacturing overhead cost
Finishing
$10,000
8,125
$18,125
Estimated fixed manufacturing overhead
Estimated variable manufacturing overhead ($5.00 per MH × 3,300 MHs)
Estimated total manufacturing overhead cost
The second step is to combine the estimated manufacturing overhead costs in the two departments ($18,125 +
$21,600 = $39,725) to calculate the plantwide predetermined overhead rate as follow:
Estimated total manufacturing overhead cost$39,725
Estimated total machine hours
6,550 MHs
Predetermined overhead rate
$ 6.06 per MH
The overhead applied to Job A is calculated as follows:
Overhead applied to a particular job = Predetermined overhead rate x Machine-hours incurred by the job
= $6.06 per MH × (1,250 MHs + 1,250 MHs)
= $6.06 per MH × (2,500 MHs)
= $15,150
Job A’s manufacturing cost:
Direct materials
Direct labor cost
Manufacturing overhead applied
Total manufacturing cost
$16,400
23,400
15,150
$54,950
The selling price for Job A:
Total manufacturing cost
Markup (40%)
Selling price
$54,950
21,980
$76,930
$ 5,100
16,500
$21,600
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Lupo Corporation uses a job-order costing system with a single plantwide
predetermined overhead rate based on machine-hours. The company based its
predetermined overhead rate for the current year on the following data:
Total machine-hours
Total fixed manufacturing overhead cost
Variable manufacturing overhead per machine-hour
32,600
$195,600
$
4
Recently, Job T687 was completed with the following characteristics:
Number of units in the job
Total machine-hours
Direct materials
Direct labor cost
10
30
$ 550
$1,100
The total job cost for Job T687 is closest to: (Round your intermediate calculations
to 2 decimal places.)
Garrison 16e Rechecks 2017-06-28
Multiple Choice

$1,400

$1,650

$850

$1,950
Correct
Explanation
Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated
variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) =
$195,600 + ($4 per machine-hour × 32,600 machine-hours) = $195,600 + $130,400 = $326,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the
allocation base = $326,000 ÷ 32,600 machine-hours = $10 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred
by the job = $10 per machine-hour × 30 machine-hours = $300
Direct materials
Direct labor
Manufacturing overhead applied
Total cost of Job T687
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$ 550
1,100
300
$1,950
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Comans Corporation has two production departments, Milling and Customizing. The
company uses a job-order costing system and computes a predetermined overhead rate
in each production department. The Milling Department’s predetermined overhead
rate is based on machine-hours and the Customizing Department’s predetermined
overhead rate is based on direct labor-hours. At the beginning of the current year, the
company had made the following estimates:
Machine-hours
Direct labor-hours
Total fixed manufacturing overhead cost
Variable manufacturing overhead per machine-hour
Variable manufacturing overhead per direct labor-hour
Milling
10,000
19,000
$41,000
$ 1.30
During the current month the company started and finished Job A319. The following
data were recorded for this job:
Job A319:
Machine-hours
Direct labor-hours
Direct materials
Milling
30
30
$ 750
Customizing
40
20
$ 140
Customizing
22,000
9,000
$28,800
$
3.50
Direct labor cost
$ 610
$ 420
If the company marks up its manufacturing costs by 20% then the selling price for Job
A319 would be closest to: (Round your intermediate calculations to 2 decimal
places.)
Garrison 16e Rechecks 2017-06-22
Multiple Choice

$3,191

$2,659
Correct

$2,216

$443
Explanation
Milling Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per
machine-hour × Total machine-hours in the department)
= $41,000 + ($1.30 per machine-hour × 10,000 machine-hours)
= $41,000 + $13,000 = $54,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the
allocation base incurred = $54,000 ÷ 10,000 machine-hours = $5.40 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred
by the job = $5.40 per machine-hour × 30 machine-hours = $162
Customizing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per
direct labor-hour × Total direct labor-hours in the department)
= $28,800 + ($4 per direct labor-hour × 9,000 direct labor-hours)
= $28,800 + $31,500 = $60,300
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the
allocation base incurred = $60,300 ÷ 9,000 direct labor-hours = $6.70 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred
by the job = $6.70 per direct labor-hour × 20 direct labor-hours = $134
Milling
$750
$610
$162
Direct materials
Direct labor
Manufacturing overhead applied
Total cost of Job A319
Total cost of Job A319
Markup ($2,216 × 20%)
Selling price
$2,216
443
$2,659
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Customizing
$140
$420
$134
Total
$ 890
1,030
296
$2,216
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During June, Buttrey Corporation incurred $69,000 of direct labor costs
and $9,000 of indirect labor costs. The journal entry to record the
accrual of these wages would include a:
Multiple Choice

debit to Work in Process of $69,000.
Correct

credit to Work in Process of $78,000.

debit to Work in Process of $78,000.

credit to Work in Process of $69,000.
Explanation
Work in Process
Manufacturing Overhead
Salaries and Wages Payable
69,000
9,000
78,000
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Luebke Inc. has provided the following data for the month of
November. The balance in the Finished Goods inventory account at the
beginning of the month was $63,000 and at the end of the month was
$31,100. The cost of goods manufactured for the month was $217,500.
The actual manufacturing overhead cost incurred was $58,300 and the
manufacturing overhead cost applied to Work in Process was $62,400.
The company closes out any underapplied or overapplied
manufacturing overhead to cost of goods sold. The adjusted cost of
goods sold that would appear on the income statement for November is:
Multiple Choice

$245,300
Correct

$185,600

$249,400

$217,500
Explanation
Manufacturing overhead underapplied (overapplied) = Actual manufacturing overhead incurred –
Manufacturing overhead applied
= $58,300 – $62,400 = $4,100 overapplied
Adjusted cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured – Ending
finished goods inventory – Manufacturing overhead overapplied
= $63,000 + $217,500 – $31,100 – $4,100
= $245,300
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Weatherhead Inc. has provided the following data for the month of March. There were
no beginning inventories; consequently, the direct materials, direct labor, and
manufacturing overhead applied listed below are all for the current month.
Direct materials
Direct labor
Manufacturing overhead applied
Total
Work In Finished
Cost of
Process
Goods Goods Sold
Total
$
4,240 $ 14,720 $ 41,560 $ 60,520
9,800
29,440
83,840
123,080
5,830
10,570
34,980
51,380
$ 19,870 $ 54,730 $ 160,380 $ 234,980
Manufacturing overhead for the month was overapplied by $4,800.
The Corporation allocates any underapplied or overapplied manufacturing overhead
among work in process, finished goods, and cost of goods sold at the end of the month
on the basis of the manufacturing overhead applied during the month in those
accounts.
The work in process inventory at the end of March after allocation of any
underapplied or overapplied manufacturing overhead for the month is closest
to: Round intermediate percentage computations to the nearest whole percent.)
Garrison 16e Rechecks 2017-08-28
Multiple Choice

$19,413

$19,931

$20,002

$19,342
Correct
Explanation
Ending work in process inventory after allocation of overapplied manufacturing overhead = $19,870 −
[($5,830/$51,380) × $4,800] = $19,870 − (11% × $4,800) = $19,342
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On November 1, Arvelo Corporation had $40,000 of raw materials on hand. During
the month, the company purchased an additional $70,000 of raw materials. During
November, $79,000 of raw materials were requisitioned from the storeroom for use in
production. These raw materials included both direct and indirect materials. The
indirect materials totaled $4,600. Prepare journal entries to record these events. Use
those journal entries to answer the following questions:
The credits to the Raw Materials account for the month of November total:
Multiple Choice

$79,000
Correct

$70,000

$40,000

$110,000
Explanation
Work in Process
Manufacturing Overhead
Raw Materials
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$74,400
$ 4,600
$ 79,000
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Tyare Corporation had the following inventory balances at the beginning and end of
May:
May 1
Raw materials $27,000
Finished Goods $76,500
Work in Process$15,000
May 30
$33,000
$69,000
$16,731
During May, $60,000 in raw materials (all direct materials) were drawn from
inventory and used in production. The company's predetermined overhead rate was
$12 per direct labor-hour, and it paid its direct labor workers $15 per hour. A total of
330 hours of direct labor time had been expended on the jobs in the beginning Work
in Process inventory account. The ending Work in Process inventory account
contained $7,200 of direct materials cost. The Corporation incurred $42,450 of actual
manufacturing overhead cost during the month and applied $40,500 in manufacturing
overhead cost.
The actual direct labor-hours worked during May totaled:
Multiple Choice

2,830 hours

3,538 hours

3,375 hours
Correct

3,960 hours
Explanation
Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
Amount of the allocation base incurred = Overhead applied ÷ Predetermined overhead rate
Amount of the allocation base incurred = $40,500 ÷ $12 per direct labor-hour = 3,375 direct labor-hours
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Baka Corporation applies manufacturing overhead on the basis of direct labor-hours.
At the beginning of the most recent year, the company based its predetermined
overhead rate on total estimated overhead of $243,900 and 8,900 estimated direct
labor-hours. Actual manufacturing overhead for the year amounted to $244,800 and
actual direct labor-hours were 6,000.
The applied manufacturing overhead for the year was closest to: (Round your
intermediate calculations to 2 decimal places.)
Garrison 16e Rechecks 2017-08-28
Multiple Choice

$300,300

$164,400
Correct

$244,800

$165,060
Explanation
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total direct labor-hours
= $243,900 ÷ 8,900 direct labor-hours
= $27.40 per direct labor-hour
Manufacturing overhead applied = Predetermined overhead rate × Actual direct labor-hours
= $27.40 per direct labor-hour × 6,000 direct labor-hours
= $164,400
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