Question

1. During the current month, Waterway Company incurs the following manufacturing costs.

(a)		Purchased raw materials of $17,800 on account.
(b)		Incurred factory labor of $38,200.
(c)		Factory utilities of $3,800 are payable, prepaid factory property taxes of $2,810 have expired, and depreciation on the factory building is $9,800.

Record the company’s manufacturing costs in its job order costing system.

2. During January, its first month of operations, Ayayai Company accumulated the following manufacturing costs: raw materials purchased $4,100 on account, factory labor $6,100, and utilities payable $2,100.

Record the company’s manufacturing costs in its job order costing system.

3. Waterway Company estimates that annual manufacturing overhead costs will be $902,000. Estimated annual operating activity bases are direct labor cost $440,000, direct labor hours 50,000, and machine hours 110,000.

Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50.)

Overhead rate per direct labor cost		enter overhead rate per direct labor cost in percentages	%
Overhead rate per direct labor hour		$enter overhead rate per direct labor hour in dollars
Overhead rate per machine hour		$enter overhead rate per machine hour in dollars

Answer 1

SOLUTION:

3. Predetermined overhead rate for each activity base

Given Estimated annual manufacturing OH cost is	902000
Est. Annual Operating activity bases are as follows
Direct Labor Cost	440000
Direct Labor Hours	50000
Machine Hours	110000
Required
1. Overhead rate per Direct Labor Cost :	Direct Labour Cost/ Total OH Cost
	440000/902000
	48.78%
2. Overhead rate per Direct Labor Hour	Direct Labour Cost/ Direct Labor Hrs
	$440000/50000hrs
	$8.8 per Hr
3. Overhead rate per Direct Machine Hour	Direct Machine Cost/ Direct Mch Hrs
	$902000-440000/110000 mch hrs
	$ 4.2 per Hr

Note: It is assumed that there is only Direct Material and Labor cost forms part of Annual Manufacturing Overhead Cost given.