Cost Accounting P_21-22

Group 1:
 Sriyati_1201004903
 Mutiara_1301058030
 Edgar Pandu Putra_1301058876
 Irine Andriani_1301059172
 Oliviane Theodora_1301059872
 Astria Novita_1301060653
 Obiyanto_1301060754
 Indra Purbo_13010

P12-1

Over- or Underapplied Factory Overhead; Predetermined Rates; Activity Levels;

Disposition of Underapplied Amount

Amalgamated Machining is a sheet-metal fabricator. The company’s total overhead costs are a
linear function of machine usage. The company’s theoretical capacity is 25,000 machine hours (MH) per
year, practical capacity is 15,000 MH per year, and normal capacity is 8,000 MH per year; 10,000 MH
were expected to be the actual activity for the year just ended.
At the beginning of each year, the company budgets the expected actual factory overhead costs
for the coming year and divides it by the budgeted (expected actual) MH for the coming year. The result
is the predetermined factory overhead rate.
Actual activity in the year just ended was 9,500 MH and budgeted factory overhead costs were
$3,500,000. The factory overhead budget would be $3,000,000 at normal capacity. Actual factory
overhead cost for the year totaled $3,470,000.
Required:
1) Calculate the amount of over- or underapplied factory overhead for the year just ended.

2) If the company had used practical capacity as the activity level in its predetermined overhead
rate calculation for the year just ended, what would have been the predetermined overhead
rate per MH? (Calculate to two decimal places, and assume the practical capacity level of
activity is within the relevant range).

3) Without influencing your answer to requirement 1, now assume factory overhead was
underapplied by $10,000. Give the end-of-period entries to close Applied Factory Overhead to
Factory Overhead Control and to close Factory Overhead Control to Cost of Goods Sold.
 Cost Accounting P_21-22
Group 1:
 Sriyati_1201004903
 Mutiara_1301058030
 Edgar Pandu Putra_1301058876
 Irine Andriani_1301059172
 Oliviane Theodora_1301059872
 Astria Novita_1301060653
 Obiyanto_1301060754
 Indra Purbo_13010

Applied Factory Overhead ($3,470,000-$10,000) $ 3,460,000

Factory Overhead Control $ 3,460,000
Factory Overhead Control $ 10,000
Cost of Goods Sold $ 10,000
4) Without influencing your answers to the preceding requirements, assume overhead was
underapplied by $10,000 and Applied Factory Overhead has already been closed to Factory
Overhead Control. The underapplied amount is to be allocated to inventories and cost of goods
sold in proportion to the balances in those accounts. The balance in Work in Process, Finished
Goods, and Cost of Goods Sold are $200,000, $400,000, and $7,400,000, respectively. In all
previous years, the over- or underapplied factory overhead was treated as an adjustment to
income or expense. Beginning inventories were insignificant. Give the end-of-period entry to
close Factory Overhead Control.
Account Balance Percentage of Total
Work in Process $ 200,000 2.5%
Finished Goods $ 400,000 5%
Cost of Goods Sold $ 7,400,000 92.5%
Total $ 8,000,000 100%

Work in Process (2.5%x$10,000) $ 250

Finished Goods (5%x$10,000) $ 500
Cost of Goods Sold (92.5%x$10,000) $ 9,250
Factory Overhead Control $ 10,000

P12-3

Overhead; Job Order Costing

Biggs Company uses job order cost accumulation. Manufacturing for December were:
 Cost Accounting P_21-22
Group 1:
 Sriyati_1201004903
 Mutiara_1301058030
 Edgar Pandu Putra_1301058876
 Irine Andriani_1301059172
 Oliviane Theodora_1301059872
 Astria Novita_1301060653
 Obiyanto_1301060754
 Indra Purbo_13010

Work in Process, December 1 (Job 50) $ 54,000

Materials and supplies requisitioned for:
Job 50 $ 45,000
Job 51 37,500
Job 52 25,500
Supplies 3,500
Factory direct labor hours:
Job 50 3,500
Job 51 3,000
Job 52 2,000
Labor costs:
Direct labor wages $ 102,000
Indirect labor wages 15,000
Supervisory salaries 6,000
Building occupancy costs 3,500
Factory equipment costs 6,000
Other factory costs 5,000
Jobs 50 and 51 were completed during December. The predetermined factory overhead rate is $4.50 per
direct labor hour.

Required:

1) Compute the total cost of Job 50

Preceding Work in Process $ 54,000
Direct Materials $ 45,000
Direct Labor (3,500 LH : 8,500 LH x $102,000) $ 42,000
Applied FOH ($4.50/LH x 3,500 LH) $ 15,750
Total Cost Job 50 156,750
2) Determine the factory overhead costs applied to Job 52 during December.

3) Compute the total factory overhead costs applied during December.

 Cost Accounting P_21-22
Group 1:
 Sriyati_1201004903
 Mutiara_1301058030
 Edgar Pandu Putra_1301058876
 Irine Andriani_1301059172
 Oliviane Theodora_1301059872
 Astria Novita_1301060653
 Obiyanto_1301060754
 Indra Purbo_13010

4) Determine the actual December factory overhead incurred.

5) How should the company dispose of any over-or underapplied factory overhead, assuming that
the amount is not significant in relation to total factory overhead?
If the amount of over- or underapplied factory overhead is insignificant, it should be closed
directly to Income Summary or to Cost of Goods Sold as a period cost.
Income Summary $ 750
Factory Overhead Control $ 750
or
Cost of Goods Sold
Factory Overhead Control $ 750 $ 750
6) Calculate the amount of over- or underapplied factory overhead for December.