Question

Assume the following information: Direct Materials $40 per unit Direct Labor $20 per unit Total Estimated...

Assume the following information:
Direct Materials
$40
per unit
Direct Labor
$20
per unit
Total Estimated Manufacturing Overhead
$8,400,000
Manufacturing overhead is allocated based on estimated direct-labor hours.
Each unit of product requires 1 direct labor hour.
1. Calculate the cost of one unit of product, assuming that the overhead per unit is based on Terri Ronson’s estimate of 440,000 hours. (Round all dollar figures to two decimal places.)
a. If 442,000 units were produced, how much overhead was applied to work in process.
2. Calculate the cost of one unit of product, assuming that the overhead per unit is based on her supervisors preferred estimate of 420,000 hours. (Round all dollar figures to two decimal places.)
a. If 442,000 units were produced, how much overhead was applied to work in process.
3. During the year, the company produced and sold 442,000 units, and incurred actual overhead of $8,450,000, what is the under/overapplied overhead if:
a. The estimated Direct Labor Hours is 440,000.
b. The estimated Direct Labor Hours is 420,000.
c. All over-applied and under-applied overhead applied directly to cost of goods sold. Assume that the company had $900,000 in net operating income before the over/under applied overhead adjustment is made. What is the revised net income after the over/underapplied overhead adjustment?
4. Should Terri Ronson go along with the general manager’s request to reduce the direct labor hours in the predetermined overhead rate computation to 420,000 hours? Be sure to discuss the operational and ethical issues related to this decision.

Homework Answers

Answer #1

1. Machine overhead per unit= 8400000/440000= 19.1

On 442000 units= 19.1*442000 = 8442200

Cost of one unit = 40+20+19.1= 79.1

2. Based on 420000 hrs = 8400000/420000= 20

cost of one unit = 40+20+20 = 80

442k werw produced, 442000*2= 884000

3a. Actual= 8450000

Applied= 442000*19.1=8442000

Under applied = 7800

3b actual 8450000

applied 20*442000=8840000

under replied =10000

3c in the first case = 907800

in second= 910000

4. In 440000 there would be 7800

in 420000 there would be 10000

The project would be rejected because in 440000 it is accurately absorbed.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
CASE 3–18 Ethics and the Manager [Course Objective B] Terri Ronsin had recently been transferred to...
CASE 3–18 Ethics and the Manager [Course Objective B] Terri Ronsin had recently been transferred to the Home Security Systems Division of National Home Products. Shortly after taking over her new position as divisional controller, she was asked to develop the division’s predetermined overhead rate for the upcoming year. The accuracy of the rate is important because it is used throughout the year and any overapplied or underapplied over- head is closed out to Cost of Goods Sold at the...
CASE 3–18 Ethics and the Manager [Course Objective B] Terri Ronsin had recently been transferred to...
CASE 3–18 Ethics and the Manager [Course Objective B] Terri Ronsin had recently been transferred to the Home Security Systems Division of National Home Products. Shortly after taking over her new position as divisional controller, she was asked to develop the division’s predetermined overhead rate for the upcoming year. The accuracy of the rate is important because it is used throughout the year and any overapplied or underapplied over- head is closed out to Cost of Goods Sold at the...
Find these 6 values. Thank you. DIRECT MATERIALS – QUANTITY PER UNIT                               &
Find these 6 values. Thank you. DIRECT MATERIALS – QUANTITY PER UNIT                                                            10 UNIT COST                                                                                                                          $20         TOTAL UNIT MATERIAL COST ?    PRODUCT LABOR HOURS PER UNIT                                                                           20                           LABOR RATE PER HOUR                                                                                                 $10         TOTAL UNIT LABOR COST ?    APPLIED MANUFACTURING OVERHEAD UNIT COST ?    TOTAL PRODUCT COST ?    QUANTITY TO BE PRODUCED                                                                                      25,000                   SELLING PRICE- THREE TIMES UNIT COST ?    MANUFACTURING OVERHEAD COST:                                                                      1. DEPRECIATION                                  $400,000 2. UTILITIES                                             $150,000 3. SUPPLIES                                             $150,000 4. TAXES                                                   $100,000...
1. The following data are given for a period: Estimated (budgeted) Manufacturing overhead cost $60,000 Actual...
1. The following data are given for a period: Estimated (budgeted) Manufacturing overhead cost $60,000 Actual Manufacturing overhead cost                          $64,000 Predetermined overhead rate: $20 per machine hour Estimated Activity base                                              3,000 machine hours Actual Activity base                                                   3,300 machine hours Manufacturing overhead is: over-applied by $6,000. over-applied by $2,000. under-applied by $2,000. over-applied by $4,000. under-applied by $4,000. 2. Salem Company applies overhead on the basis of direct labor hours. Its predetermined overhead rate is $70 per direct labor hour.    The following additional...
Jasmine Company had the following amounts: Direct materials $10 per unit Direct Labor $27 per unit...
Jasmine Company had the following amounts: Direct materials $10 per unit Direct Labor $27 per unit Variable overhead $2.50 per unit Fixed overhead $75,500 Variable selling expenses $4 per unit Fixed selling and administrative expenses $125,000 65,000 units produced 57,000 units sold Sales price per unit is $52 each Calculate the VARIABLE product cost per unit and prepare a Contribution Margin Income Statement under Variable Costing in order to fill in the rest of the information. Variable product cost per...
Burns Company incurred the following costs during the year: direct materials $23.50 per unit; direct labor...
Burns Company incurred the following costs during the year: direct materials $23.50 per unit; direct labor $15.30 per unit; variable manufacturing overhead $17.50 per unit; variable selling and administrative costs $9.60 per unit; fixed manufacturing overhead $126,000; and fixed selling and administrative costs $11,000. Burns produced 6,300 units and sold 6000 units. Determine the manufacturing cost per unit under (a) absorption costing and (b) variable costing. (Round answers to 2 decimal places, e.g. 52.75.)
Your Company uses a predetermined overhead rate based on direct labor cost. The POR is 80%...
Your Company uses a predetermined overhead rate based on direct labor cost. The POR is 80% of direct labor costs. Use the following information to determine by how much the manufacturing overhead cost for the current year will be over or under applied.                     Direct labor-hours: Estimated for the year................ 24,000 Actual hours worked.................. 19,500 Direct labor cost: Estimated for the year................ $300,000 Actual cost incurred................... $210,000 Manufacturing overhead: Estimated for the year................ $240,000 Actual cost incurred................... $185,000 The manufacturing overhead...
Stefani Company has gathered the following information about its product. Direct materials: Each unit of product...
Stefani Company has gathered the following information about its product. Direct materials: Each unit of product contains 4.90 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 1.10 pounds. Materials cost $4 per pound, but Stefani always takes the 2.00% cash discount all of its suppliers offer. Freight costs average $0.35 per pound. Direct labor. Each unit requires 1.80 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly...
iii) Brand Corporation has provided the following information: Cost per Unit Cost per Period Direct materials...
iii) Brand Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 4.90 Direct labor $ 4.00 Variable manufacturing overhead $ 1.60 Fixed manufacturing overhead $ 8,700 Sales commissions $ 2.00 Variable administrative expense $ 0.35 Fixed selling and administrative expense $ 5,700 For financial reporting purposes, the total amount of period costs incurred to sell 3,000 units is closest to: Multiple Choice Top of Form $12,750 $7,050 $5,700 $8,700 Bottom of Form Bottom of...
Kimm Company has gathered the following information about its product. Direct materials: Each unit of product...
Kimm Company has gathered the following information about its product. Direct materials: Each unit of product contains 4.10 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.40 pounds. Materials cost $3 per pound, but Kimm always takes the 3.86% cash discount all of its suppliers offer. Freight costs average $0.29 per pound. Direct labor. Each unit requires 1.70 hours of labor. Setup, cleanup, and downtime average 0.29 hours per unit. The average hourly...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT