Question

1. Consider the following selected cost data for the Pittsburgh Forging Company for 2018. Budgeted manufacturing overhead costs $7,500,000

Budgeted machine-hours 250,000

Actual manufacturing overhead costs $7,300,000

Actual machine-hours 245,000

The company uses normal costing. Its job-costing system has a single manufacturing overhead cost pool. Costs are allocated to jobs using a budgeted machine-hour rate.

1. Compute the budgeted manufacturing overhead rate. (1pt)

2. Compute the amount of under- or overallocation of manufacturing overhead. Prepare a journal entry to dispose of this amount. (1pt)

2. Parker Company produces mathematical and financial calculators and operates at capacity. Data related to the two products are presented here:

	Mathematical	Financial
Annual production in units	50,000	100,000
Direct material costs	$150,000	$300,000
Direct manufacturing labor costs	$ 50,000	$100,000
Direct manufacturing labor-hours	2,500	5,000
Machine-hours	25,000	50,000
Number of production runs	50	50
Inspection hours	1,000	500

Total manufacturing overhead costs are as follows:

Total Machining costs             $375,000

Setup costs                              $120,000

Inspection costs                      $105,000

1. Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product. (1.5 pt)

2. Compute the manufacturing cost per unit for each product using Activity-based Costing.(2 pts)

3. Freddie and Jason have just opened the Texas Toothpick, a chain-saw sharpening and repair service located on Elm Street. The Texas Toothpick promises same-week repair service. Freddie and Jason are concerned that a projected dramatic increase in demand as the end of October nears will cause service to deteriorate. Freddie and Jason have had difficulty attracting employees, so they are the only workers available to complete the work.

Safety considerations require that they each work no more than 40 hours per week. The first chain-saw sharpening and repair required 7 hours of work, and an 80 percent learning curve is anticipated.

Week                                      Units               Cumulative Units

October 2–6                            8                                  8

October 9–13                          19                                27

October 16–20                        10                                37

October 23–27                        27                                64

a. How many total hours are required to complete 64 chain saws?(0.5pt)

b. How many hours of work are required for the week ending on Friday the 13th? (1pt)

c. Will Freddie and Jason be able to keep their same week service promise during their busiest week just before Halloween?(2pts)

Answer 1