3-48: Garcia. Inc.

uses a job-order costing system for its products, which pass from the machining Department, to the Assembly Department, to finished-goods inventory. The achining Department is heavily automated! in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead by the use of machine hours in the machining department and direct-labor in the assembly department. The following information relates to the just ended" Machining Department #udgeted manufacturing overhead$$ %&,''',''' Actual manufacturing overhead$$$ #udgeted direct-labor cost$$$$$ Actual direct-labor cost$$$$$$ #udgeted machine hours$$$$$.... Actual machine hours$$$$$$$. &,*+,,''' -,+'',''' -,&+',''' &'',''' &*+,''' Assembly Department %(,')',''' (,'+',''' +,,'',''' +,.)',''' -'',''' --','''

The data that follow pertain to job no...+ the only job in production at year-end. Machining Department Direct material$$$$$. Direct labor$$$$$$. achine hours$$$$$. %*&,+'' *.,/'' (,' Assembly Department %,,.'' +),,'' -+'

0elling and administrative e1penses amounted to %*,+'','''. Required: -. Assuming the use of normal costing, determine the predetermined overhead rates used in the achining Department and assembly Department. *. 2ompute the cost of the company3s year-end wor4 in-process inventory. (. Determine whether overhead was under-applied or over-applied during the year in the machining department. &. 5epeat re6uirement ( for the assembly department. +. If the company disposes of under-applied overhead as an adjustment to 2ost of Goods 0old, would the company3s cost of goods sold account inv7crease or decrease8 91plain ,. :ow mach overhead would have been charged to the company3s wor4-in-process account during the year8

.. 2omment on the appropriateness of the company3s cost drivers ;i.e. the use of machine hours in machining and labor-cost in Assembly<. 3-50: The following data refers to :uron 2orporation for the year *'1*.

0ales revenue$$$$$$$$$$$$$$$$$$$$$$.. %*,-'+,''' 5aw material inventory -*=(-=1-$$$$$$$$$$$$$$$. >urchase of raw material$$$$$$$$$$$$$$$$$$. 5aw material inventory -*=(-=1*$$$$$$$$$$$$$$$. Direct labor cost incurred$$$$$$$$$$$$$$$$$$ 0elling and administrative e1penses$$$$$$$$$$$$$$ Indirect labor cost incurred $$$$$$$$$$$$$$$$.. >roperty ta1es on factory$$$$$$$$$$$$$$$$$$ Depreciation on factory building$$$$$$$$$$$$$$$. Income ta1 e1penses$$$$$$$$$$$$$$$$$$$. Indirect material used$$$$$$$$$$$$$$$$$$.. Depreciation on factory e6uipment$$$$$$$$$$$$$ Insurance on factory and e6uipment$$$$$$$$$$$$.. ?tilities for factory$$$$$$$$$$$$$$$$$$$ @or4 in process inventory -*=(-=1-$$$$$$$$$$$$ @or4 in process inventory -*=(-=1*$$$$$$$$$$$$ Ainished goods inventory -*=(-=1-$$$$$$$$$$$$ Ainished goods inventory -*=(-=1*$$$$$$$$$$$$$ Applied manufacturing overhead$$$$$$$$$$$$$ Required: -. >repare :uron3s schedule of cost of goods manufactured for *'1*. *. >repare :uron3s schedule of cost of goods sold *'1*. The company closes over applied or under applied overhead into cost of goods sold. )/,''' .(-,''' +/,''' &.&,''' *,/,''' -+',''' /',''' -*+,''' *+,''' &+,''' ,',''' &',''' .',''' -'&',''' (+,''' &',''' +..,+''

(. >repare :uron3s income statement *'1*. &. #uild a spreadsheet" construct an e1cel spreadsheet to solve all of the preceding re6uirements. 0how how both costs and income statement will change it the following data change" 0ales revenue was % *,--+,''' applied manufacturing overhead was %+)',''', and utilities amounted to %.),'''.
3-56: Tiana 0har, the controller for #ondi Aurniture 2ompany, is the process of analyBing the overhead costs for the month of Covember. 0he has gathered the following data for the month. ab!r Direct labor hours Dob ..$$$$$$$$$$$$$$$$$$$$.. Dob .)$$$$$$$$$$$$$$$$$$$$.. Dob ./$$$$$$$$$$$$$$$$$$$$.. Eabor cost Direct labor wages$$$$$$$$$$$$$$$. Indirect labor wages$$$$$$$$$$$$$$$ 0upervisory salaries$$$$$$$$$$$$$$$ Material Inventories, Covember 5aw material and supplies$$$$$$$$$$$$. @or4 in process ;job ..<$$$$$$$$$$$$$ Ainished goods$$$$$$$$$$$$$$$$.. >urchase of raw material and supplies 5aw material$$$$$$$$$$$$$$$$$ 0upplies ;indirect material<$$$$$$$$$$$. Direct material and supplies re6uisitioned for production" Dob ..$$$$$$$$$$$$$$$$$$$$ Dob .)$$$$$$$$$$$$$$$$$$$$ Dob ./$$$$$$$$$$$$$$$$$$$$ 0upplies ;indirect material<$$$$$$$$$$$.. %&+,''' (.,''' *+,''' -*,''' %-(+,''' -+,''' %-',+'' +&,''' --*,+'' %*'&,''' -+,''' ,,''' (,+'' (,''' *,'''

Total$$$$$$$$$$$$$$$$$$$$ "ther #uilding occupancy cost ;heat, light, depreciation etc< Aactory facilities$$$$$$$$$$$$$$.. 0ales offices$$$$$$$$$$$$$$$$ Administrative offices$$$$$$$$$$$$ Total $$$$$$$$$$$.$$$$$$$$ >roduction e6uipment cost" >ower$$$$$$$$$$$$$$$$$$$ 5epairs and maintenance$$$$$$$$$$$.. Depreciation$$$$$$$$$$$$$$$$. Gther$$$$$$$$$$$$$$$$$$$ Total$$$$$$$$$$$$$$$$$$$. F

%-*','''

%,,&'' -,,'' -,''' %/,'''

%&,-'' -,+'' -,+'' -,''' %),-''

The firm3s job order costing system uses direct-labor hours as the cost driver for overhead applications. In December of the preceding year, 0har had prepared the following budget for direct-labor and manufacturing-overhead costs for the current year. The plant is capable of operating at -+',''' direct labor hours per year. :owever, 0har estimates that normal usage is -*',''' hours in a typical year. Material !#erhead Direct-lab!r c!st -'','''$$$$$$$$$$$$$$ -*','''$$$$$$$$$$$$$$ -&','''$$$$$$$$$$$$$$ $ariable %(*+,''' (/',''' &++,''' %i&ed %*-,,''' *-,,''' *-,,''' .

During Covember the following jobs are completed Dob ..$$$$$$$$$$$$$$$$$sides chairs Dob .)$$$$$$$$$$$$$$$$.. 9nd tables Required: Assist 0har by ma4ing the following calculations. -. 2alculate the predetermined overhead rate for the current year. *. 2alculate the total cost of job ... (. 2ompute the amount of manufacturing overhead applied to job ./ during Covember

&. @hat was the total amount of manufacturing overhead applied during Covember8 +. 2ompute the actual manufacturing overhead incurred during Covember. ,. 2alculate the over applied or under applied overhead for Covember.

3-60: TeleTech 2orporation manufactures two fa1 machines or the business mar4et. 2ost estimates for the models for current two models for the current year are as follow" 'asic system Direct material$$$$$$$$$$. Direct labor ;*' hours at % -+per hour<$.. anufacturing overheadH$$$$$$. Total$$$$$$$$$$$$$$ % &'' ('' &'' % -,-'' Ad#anced system % )'' ('' &'' % -,+''

Hthe predetermined overhead rate is % *' per-direct-labor hour 9ach model of fa1 machine re6uires *' hours of direct labor. The basic system re6uires + hours in department and -+ hours in department #.the advance system re6uires -+ hours in department A and + hours in department #. the overhead cost in these two production department are as follows" Department A Iariable cost$$$$$$$$$ Ai1ed cost$$$$$$$$$$ %-, per direct-labor hour *'',''' Department ' %& per direct-labor hour *'','''

The firm3s management e1pects to operate at a level of *',''' direct-labor hours in each production department during the current year. Required: -. 0how how the company3s predetermined overhead rate was determined. *. If the firm prices each model of fa1 machines at -' percent over its cost, what will be the price of each model8 (. 0uppose the company were to use departmental predetermined overhead rates. 2alculate the rate for each of the two production department. &. 2ompute the production cost of each model using the departmental overhead rates calculated in re6uirement ;(<. +. 2ompute the price should be change in each model, assuming the company continues to price each product at -' percent above cost. ?se the revised product cost calculated in the re6uirement ;&<.

,. @rite the memo to president of TelTech 2orporation ma4ing a recommendation as to whether the firm should use a plant wide overhead rate or departmental rates. 2onsider the potential implementations of the overhead rates and the firm3s pricing policy. :ow might these considerations affect the firm3s ability to compute in the mar4et place8 3-6( 5efer to the data given in preceding problem of TelTech corporation. The company has implemented an activity-based costing system with the following activity cost pools and cost drivers. )!st dri#ers Acti#ity Acti#ity )!st *!tal 'asic +ystem ,r!duct line achine setup aterial receiving Inspection achinery-related 9ngineering Total overhead %-'',''' ,',''' )',''' &*',''' -&',''' %)'',''' *''setups )',''' lbs -,,'' inspections ,',''' machine-hrs +' (',''' .'' *',''' . Ad#ance system pr!duct line -+' +',''' /'' &',''' &','''

.,''' engineering hrs (,'''

TelTech plans to produce -,''' units of each model of fa1 machine. Required: -. 2ompute the cost rate per unit of each cost driver ;e.g. the cost per setup< *. Determine the total overhead to be assigned to each product line under activity-based costing. (. 2alculate the overhead assigned per unit of each type fa1 machine under A#2. &. >repare the table comparing the total product cost assigned to each type fa1 machine using a plant wide overhead rate, departmental overhead rates, and activity-based costing. ;this re6uirement relies upon the solution of preceding problem<.