Concept explainers
(Appendix 4A) Predetermined
Barrymore Costume Company, located in New York City, sews costumes for plays and musicals. Barrymore considers itself primarily a service firm, as it never produces costumes without a preexisting order and only purchases materials to the specifications of the particular job. Any finished goods ending inventory is temporary and is zeroed out as soon as the show producer pays for the order. Overhead is applied on the basis of direct labor cost. During the first quarter of the year, the following activity took place in each of the accounts listed:
Job 32 was the only job in process at the end of the first quarter. A total of 1,000 direct labor hours at $10 per hour were charged to Job 32.
Required:
- 1. Assuming that overhead is applied on the basis of direct labor cost, what was the overhead rate used during the first quarter of the year?
- 2. What was the applied overhead for the first quarter? The actual overhead? The under- or overapplied overhead?
- 3. What was the cost of goods manufactured for the quarter?
- 4. Assume that the overhead variance is closed to the cost of goods sold account. Prepare the
journal entry to close out the overhead control account. What is the adjusted balance in Cost of Goods Sold? - 5. For Job 32, identify the costs incurred for direct materials, direct labor, and overhead.
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Chapter 4 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
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- A stapler manufacturer uses a single plantwide predetermined overhead allocation rate to allocate its indirect costs. The CFO thinks this process could be inaccurate. Which of the following statement is​ incorrect, if the manufacture makes the transition to using multiple predetermined overhead allocation​ rates?  A. The allocation process changes because there are now multiple cost pools and multiple allocation bases.  B. Management must analyze the expected overhead costs and separate them into a cost pool for each department.  C. In selecting machine usage as the primary cost driver for the Production​ Department, management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred.  D. The use of multiple predetermined overhead allocation rates is more​ complex, but it may be more accurate.arrow_forwardScattergraph, High–Low Method, and Predicting Cost for a Different Time Period from the One Used to Develop a Cost Formula Farnsworth Company has gathered data on its overhead activities and associated costs for the past 10 months. Tracy Heppler, a member of the controller's department, has convinced management that overhead costs can be better estimated and controlled if the fixed and variable components of each overhead activity are known. One such activity is receiving raw materials (unloading incoming goods, counting goods, and inspecting goods), which she believes is driven by the number of receiving orders. Ten months of data have been gathered for the receiving activity and are as follows: Month Receiving Orders Receiving Cost ($) 1 1,000 27,000 2 700 22,500 3 1,500 42,000 4 1,200 25,500 5 1,300 37,500 6 1,100 31,500 7 1,600 43,500 8 1,400 36,000 9 1,700 40,500 10 900 24,000  Required: 1.  On your own paper, prepare a scattergraph based on the 10…arrow_forwardHow can I get this problem resolve? High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates:   Department  Molding Painting Direct labor-hours  36,500   59,800  Machine-hours  87,000   34,000  Fixed manufacturing overhead cost $ 208,800  $ 532,220  Variable manufacturing overhead per machine-hour $ 3.20   -  Variable manufacturing overhead per direct labor-hour  -  $ 5.20    Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:   Department…arrow_forward
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