Question

1. Granite Company uses a job-order costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year, manufacturing overhead and direct labor-hours were estimated at $80,000 and 16,000 hours respectively, for the year. At the end of the year, it was determined that the company actually worked 15,000 direct labor-hours for the year, and incurred $78,000 in actual manufacturing overhead costs. In June, Job #315 was completed. Materials costs on the job totaled $1,500 and labor costs totaled $2,400. There were 400 direct labor hours worked on Job #315. a. Determine the predetermined overhead rate for the year. b. Determine the amount of overhead charged to all jobs during the year (in total), and write the journal entry to apply overhead. c. Determine the amount of underapplied or overapplied overhead for the year, and write the journal entry to close the manufacturing overhead account assuming this amount was immaterial. d. Assuming that 100 units were completed, determine the total product cost and the per unit product cost that would appear on the job cost sheet for Job #315. 2. Lester Company manufactures a single product. Each unit sells for $15. The firm's projected costs are listed below: Variable costs per unit: Direct Material Direct Labor Variable Mfg. Overhead $3.00 $1.50 $1.00 Variable Selling $0.50 Fixed costs: Fixed Mfg. Overhead $120,000 Fixed Selling $ 60,000 a. Calculate the Breakeven Point in Units and in Dollars b. Calculate how many Units and Dollars must Lester Company sell to make a target profit of $75,000? c. Prove your answer from question (b) by preparing a Contribution Approach Income Statement. d. At this level of sales, what is Lester Company’s Degree of Operating Leverage? e. At this level of sale, what is Lester Company’s Margin of Safety in Units and Dollars?

Answer 1

As per policy, only one question is allowed to answer at a time, so answering Q1 here :

1)
a. Predetermined overhead rate = $80000/16000 DLHs = $5 per DLH
b. The amount of overhead charged to all jobs during the year = 15000 * $5 = $75000
c. Under applied overhead for the year = Actual overhead - applied overhead = $78000 - $75000 = $3000
Journal entry:
Debit	Cost of sales	$3,000
Credit	Manufacturing overhead		$3,000
d. Job 315 :
	Amount
DM	1500
DL	2400
M o/h	2000	400 * $5
Total manuf. Costs	5900
Units completed	100
Cost per unit	$59 per unit