Chapter 4 Guided Practice


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4GP.1 PDOH Rates

4GP.1.E1

A firm uses job-order costing and budgets 10,000 direct labor hours and twice as many machine hours for for next period. It also has the following budgeted costs for the next period.

  • Direct labor wages: $100,000
  • Direct materials: $150,000
  • Equipment depreciation: $50,000
  • Sales and marketing: $45,000
  • Line supervisor salaries: $25,000

Required

If the firm uses machine hours as its overhead cost driver, what is the firm’s pre-determined overhead rate (PDOH rate) for the next period?

4GP.1.M1

A firm has the following budgeted and actual costs.

  • Direct materials: $5,000 (budgeted); $5,500 (actual)
  • Direct labor: $19,000 (budgeted); $17,000 (actual)
  • Factory lease: $1,500 (budgeted); $1,500 (actual)
  • Factory utilities: $750 (budgeted); ($1,150 (actual)
  • Headquarters lease: $1,000 (budgeted); $1,000 (actual)

The firm uses direct labor hours to apply overhead using job-order costing. The firm budgeted 100 direct labor hours for the current period but used 90 direct labor hours.

Required

What is the firm’s PDOH rate?

4GP.2 Overhead Allocation & Unit Cost

4GP.2.E1

The firm has $2,000,000 in budgeted overhead costs and 200,000 budgeted direct labor hours. Three jobs during the period used, respectively, 10 direct labor hours, 15 direct labor hours, and 9 direct labor hours.

Required

How much overhead is applied to these three jobs?

4GP.2.M1

A firm has a PDOH rate of $100 per machine hour. The firm has a job, AAA, that has the following costs and consumption. (AAA consists of 75 units.)

  • Direct materials: $51,100
  • Direct labor: $112,150
  • Direct labor hours: 1,040
  • Machine hours: 500

Required

(A) What is the total overhead cost for job AAA?

(B) What is the overall cost for job AAA?

(C) What is the cost per unit of AAA?

4GP.3 OH Control Account

4GP.3.E1

Jones, Inc. has a PDOH rate of $5.50 per mile driven. Assume the firm pays all costs in cash. The firm drove 500,000 miles this period and incurred $2,000,000 in equipment costs and $1,000,000 in maintenance costs.

Required

(A) What is the firm’s debit to WIP for the period?

(B) What is the firm’s credit to cash?

(C) What is the balance in the overhead control account during the initial trial balance (before any closing entries)?

4GP.3.M1

Brenda’s Bakery, LLC has a $1.15 per baking hour PDOH rate. The firm uses 2,500 baking hours this period. and incurred $2,400 of actual overhead costs.

Brenda’s has 50 units in production at the end of the period and 10,000 units completed during the period (75% of which are already sold).

Required

(A) What is the balance of the overhead control account during the initial trial balance?

(B) What is the likely closing entry for the overhead control account if the firm considers its balance from part A to be small and immaterial?

(C) What is the likely closing entry for the overhead control account if the firm considers its balance from part A to be small and immaterial?

(D) What is the difference in next period’s income between the closing entries in part A and part B?

4GP.4 Departmental PDOH Rates

4GP.4.E1

Trial Balance, Inc. has three departments, which each apply overhead to jobs based on a departmental overhead rate as follows.

  • Department A: $15 per direct labor hour
  • Department B: $1.25 per machine hour
  • Department C: $10.15 per engineering hour

Job BB-481516, which consists of 120 units, consumes the following.

  • $1,500 direct materials
  • $2,500 direct labor (at $10 per hour)
  • 20 engineering hours
  • 25 machine hours

Required

(A) What is job BB-481516’s total overhead cost?

(B) What is job BB-481516’s total cost?

(C) What is job BB-481516’s unit cost?

4GP.4.M1

Trial Balance, Inc. (the same company as problem 4GP.4.E1) consumes the following during the period.

  • $1,000,000 total direct materials
  • $300,000 total direct labor (at $10 per hour)
  • $275,000 Department A actual overhead cost
  • $115,000 Department B actual overhead cost
  • $500,000 Department C actual overhead cost
  • 10,000 engineering hours
  • 250,000 machine hours

The firm uses a single overhead control account that includes all three departments’ overhead costs. Firm has a policy about closing out the joint overhead control account. If the trial balance of the account is greater than $50,000, then it is closed out based on the units represented by the WIP, FG, and COGS accounts. If the balance is less than $50,000, the account is closed out to COGS.

The firm has the following total units represented by the following accounts.

  • WIP: 50,000 units
  • FG: 10,000 units
  • COGS: 100,000 units

Required

What is the closing entry for the overhead control account?