Question

Scholastic Brass Corporation manufactures brass musical instruments for use by high school students. The company uses...

Scholastic Brass Corporation manufactures brass musical instruments for use by high school students. The company uses a normal costing system, in which manufacturing overhead is applied on the basis of direct-labor hours. The company’s budget for the current year included the following predictions.

Budgeted total manufacturing overhead $ 466,900
Budgeted total direct-labor hours (based on practical capacity) 20,300

During March, the firm worked on the following two production jobs:

            Job number T81, consisting of 74 trombones

            Job number C40, consisting of 110 cornets

The events of March are described as follows:

a. One thousand square feet of rolled brass sheet metal was purchased on account for $5,000.

b. Three hundred pounds of brass tubing was purchased on account for $3,000.

c. The following requisitions were submitted on March 5:

    Requisition number 112: 250 square feet of brass sheet metal at $5 per square foot (for Job number T81)

    Requisition number 113: 1,000 pounds of brass tubing, at $10 per pound (for Job number C40)

    Requisition number 114: 10 gallons of valve lubricant, at $10 per gallon

    All brass used in production is treated as direct material. Valve lubricant is an indirect material.

d. An analysis of labor time cards revealed the following labor usage for March.

    Direct labor: Job number T81, 800 hours at $20 per hour

    Direct labor: Job number C40, 900 hours at $20 per hour

    Indirect labor: General factory cleanup, $5,000

    Indirect labor: Factory supervisory salaries, $9,000

e. Depreciation of the factory building and equipment during March amounted to $12,000.

f. Rent paid in cash for warehouse space used during March was $1,200.

g. Utility costs incurred during March amounted to $2,100. The invoices for these costs were received, but the bills were not paid in March.

h. March property taxes on the factory were paid in cash, $2,400.

i. The insurance cost covering factory operations for the month of March was $3,100. The insurance policy had been prepaid.

j. The costs of salaries and fringe benefits for sales and administrative personnel paid in cash during March amounted to $7,000.

k. Depreciation on administrative office equipment and space amounted to $5,000.

l. Other selling and administrative expenses paid in cash during March amounted to $1,000.

m. Job number T81 was completed on March 20.

n. Half of the trombones in Job number T81 were sold on account during March for $700 each.

During March, the firm worked on the following two production jobs:

            Job number T81, consisting of 74 trombones

            Job number C40, consisting of 110 cornets

The events of March are described as follows:

a. One thousand square feet of rolled brass sheet metal was purchased on account for $5,000.

b. Three hundred pounds of brass tubing was purchased on account for $3,000.

c. The following requisitions were submitted on March 5:

    Requisition number 112: 250 square feet of brass sheet metal at $5 per square foot (for Job number T81)

    Requisition number 113: 1,000 pounds of brass tubing, at $10 per pound (for Job number C40)

    Requisition number 114: 10 gallons of valve lubricant, at $10 per gallon

    All brass used in production is treated as direct material. Valve lubricant is an indirect material.

d. An analysis of labor time cards revealed the following labor usage for March.

    Direct labor: Job number T81, 800 hours at $20 per hour

    Direct labor: Job number C40, 900 hours at $20 per hour

    Indirect labor: General factory cleanup, $5,000

    Indirect labor: Factory supervisory salaries, $9,000

e. Depreciation of the factory building and equipment during March amounted to $12,000.

f. Rent paid in cash for warehouse space used during March was $1,200.

g. Utility costs incurred during March amounted to $2,100. The invoices for these costs were received, but the bills were not paid in March.

h. March property taxes on the factory were paid in cash, $2,400.

i. The insurance cost covering factory operations for the month of March was $3,100. The insurance policy had been prepaid.

j. The costs of salaries and fringe benefits for sales and administrative personnel paid in cash during March amounted to $7,000.

k. Depreciation on administrative office equipment and space amounted to $5,000.

l. Other selling and administrative expenses paid in cash during March amounted to $1,000.

m. Job number T81 was completed on March 20.

n. Half of the trombones in Job number T81 were sold on account during March for $700 each.

  
The March 1 balances in selected accounts are as follows:

  

Cash $   10,000
Accounts Receivable 21,000
Prepaid Insurance 5,000
Raw-Material Inventory 149,000
Manufacturing Supplies Inventory 300
Work-in-Process Inventory 91,000
Finished-Goods Inventory 220,000
Accumulated Depreciation: Buildings and Equipment 101,000
Accounts Payable 12,000
Wages Payable 6,000

Calculate the overapplied or underapplied overhead for March

  

Homework Answers

Answer #1

Predetermined overhead rate = Budgeted manufacturing overhead/Budgeted direct labor hours = $466900/$20300 = $23 per direct labor hour

Overheads applied [$23 x (800 + 900)] 39100
Actual overheads incurred:
Indirect materials (10 x $10) 100
Indirect labor-General factory cleanup 5000
Indirect labor-Factory supervisory salaries 9000
Depreciation of factory building and equipment 12000
Rent for warehouse space 1200
Utility costs 2100
Property taxes on factory 2400
Insurance cost of factory operations 3100
Total actual overhead costs incurred 34900
Overapplied overhead for March $ 4200
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