Exercise no. 1
On November 30, the work in process account of the Bee Dee Company
showed:
WORK IN PROCESS ACCOUNT
Materials
$20,800
Labour
20,160
FOH
Finish goods
$45,600
15,840
$56, 800
Balance
$45, 600
$11, 200
Materials charged to the work still in process amounted $4560. Factory
overhead is a fixed percentage of direct labour cost.
Required: The individual amounts of factory overhead and direct labour cost
charged to closing balance of work in process.
Balance
= $11, 200
Materials = - 4, 560
= $ 6, 640
Labour
FOH
TOTAL
Labor
FOH
= 20, 160
= 15, 840
= 36, 000
$3, 718. 40
$2, 921. 60
Exercise no. 2
56%
44%
100%
3, 718. 40
2, 921. 60
6, 640
The Millan Company employees 150 people who work 8 hours per day
and 5 days a week. Normal capacity for the month is based on assumption
that the equivalent of 47 weeks of work can be expected from an employee.
Required:
1. The number of direct labour hours to be used in setting up factory
overhead rate based on normal capacity.
150 x 8
=1,200
1,200 x 5 = 6,000
6,000 x 47 = 282,000 direct labor hours
2. The number of direct labour hours if management and workers agree to
work for 10 hours, 4 day a week.
150 x 10 =1,500
1,500 x 4 = 6,000
6,000 x 47 = 282,000 direct labor hours
Exercise no. 3
The Carrcroft Company estimates its factory overhead for next period
at $54,000. It is estimated that 36,000 units will be produced at a material
cost of $45,000. Production will require 24,000 direct labour hours at an
estimated cost of $120,000. The machine will require about 1600 hours.
Required: The predetermined factory overhead rate based:
1. Material cost
Factory overhead rate =Est. factory overhead
Est. direct mat. Cost
=$54, 000 X 100
$45,000
= 120% of direct material cost
2. Units of production
Factory overhead rate =Est. factory overhead
Est. units of production
=$54, 000
36,000
= $1.50/unit
3. Machine Hours
Factory overhead rate =Est. factory overhead
Est. machine hours
=$54, 000
1,600
= $33.75/machine hour
4. Direct Labour Cost
Factory overhead rate =Est. factory overhead
Est. direct labor cost
=$54, 000 x 100
$120,000
= $45% of direct labor cost
5. Direct Labour Hours
Factory overhead rate =Est. factory overhead
Est. direct labor hours
=$54, 000
24, 000
= $2.25/direct labor hour
Exercise no. 4
Normal capacity of the Duro Company is set at 90,000 hours. At this
level of capacity the fixed overhead is $36,000 and variable overhead is
$67,500. Actual results show 75,000 hours worked during the period.
Required:
1. Predetermined overhead rate based on normal capacity.
Est. Factory overhead = fixed overhead + variable overhead
= $36, 000 + $67, 500
= $103, 500
Direct Labour Hours
Factory overhead rate
=Est. factory overhead
Est. direct labor hours
=$103, 500
90, 000
= $1.15/direct labor hour
2. The amount of factory overhead applied to production.
Applied factory overhead
= $1.15 x 75, 000
= $86, 250
Exercise no. 5
Speed Co. assembles and sells electric mixers. All parts purchased
and labour is paid on the basis of $32 per mixer assembled. The cost of parts
per mixer totals $40. As the company
Handles only this one product, the unit cost basis for applying factory
overhead is used. Estimated factory overhead for the coming period based
on production of 30,000 mixer is as follows:
Indirect materials
$220,000
Indirect Labour $240,000
Light and heat
30,000
Depreciation
25,000
Miscellaneous
55,000
During the period 29,000 mixers were assembled and actual factory
overhead was $565,300.
Required:
1. Predetermine overhead rate.
Est. Factory overhead rate= $220,000+30,000+55,000+240,000+
25,000
=$570, 000
Units of Production
Factory overhead rate
=Est. factory overhead
Est. units of production
=$570,000
30, 000
= $19/ unit
2. The amount of factory overhead applied to production.
Applied factory overhead
= $19 x 29, 000
= $551, 000
3. The amount of over or under applied factory overhead.
Actual factory overhead:
$565,300
The amount of indirect cost incurred.
Less: Applied factory overhead:
(551,000)
The amount of cost allocated to output.
Under applied
$14, 300
Exercise no. 6
Normal capacity of a Company’s power plant is estimated to be
4750,000 kilowatt hours per month. At this level of activity, fixed overhead is
estimated to be $171,000 and variable overhead is $209,000. During
November the power plant produced 5000,000 kilowatt hours and actual
overhead for the month totaled $393,000.
Required:
1. Predetermined overhead rate based on normal capacity.
Est. Factory overhead = fixed overhead + variable overhead
= $171, 000 + $209, 000
= $380, 000
Factory overhead rate
=Est. factory overhead
Est. direct labor hours
=$380, 000
4,750, 000
= $0.08/direct labor hour
2. The amount of factory overhead applied to production.
Applied factory overhead
= $0.08 x 500, 000
= $400, 000
3. Over or under applied factory overhead.
Actual factory overhead:
The amount of indirect cost incurred.
Less: Applied factory overhead:
The amount of cost allocated to output.
Over applied
$393,000
(400,000)
$7,000