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Folk CH 02 Exam

The document contains exam questions and solutions related to manufacturing overhead calculations for various companies. It covers topics such as predetermined overhead rates based on machine hours and direct labor hours, as well as the determination of costs of goods manufactured. Each question provides a detailed breakdown of costs and calculations to arrive at the final figures.

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6 views3 pages

Folk CH 02 Exam

The document contains exam questions and solutions related to manufacturing overhead calculations for various companies. It covers topics such as predetermined overhead rates based on machine hours and direct labor hours, as well as the determination of costs of goods manufactured. Each question provides a detailed breakdown of costs and calculations to arrive at the final figures.

Uploaded by

glorianathalia0305
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Folk Exam Questions - Chapter 2

1. Simmons Company has the following estimated costs for next year:

Direct materials $ 60,000


Direct labor 220,000
Sales commissions 300,000
Salary of production supervisor 140,000
Indirect materials 20,000
Advertising expense 44,000
Rent on factory equipment 64,000

Simmons estimates that 40,000 direct labor and 64,000 machine hours will be worked
during the year. If overhead is applied on the basis of machine hours, what will be the
overhead rate per hour?

Solution:

Salary of production supervisor $140,000


Indirect materials 20,000
Rent on factory equipment 64,000
Estimated manufacturing overhead costs 224,000
Estimated machine hours  64,000
Predetermined overhead rate $3.50 per MH

2. Houghton Company uses a predetermined overhead rate based on direct labor hours to
apply manufacturing overhead to jobs. At the beginning of the year, the company
estimated manufacturing overhead would be $200,000 and direct labor hours would be
20,000. The actual figures for the year were $220,000 for manufacturing overhead and
21,000 direct labor hours. What will the cost records for the year show?

Solution:

First, calculate the predetermined overhead rate (based on direct labor hours here):
Estimated overhead costs  Estimated direct labor hours = Predetermined rate
$200,000  20,000 direct labor hours = $10.00/direct labor hour
Then, determine the amount of manufacturing overhead assigned during the period:
Predetermined overhead rate x Actual direct labor hours = Overhead assigned
$10.00/direct labor hour x 21,000 direct labor hours = $210,000

Finally, compare the actual manufacturing overhead costs to the amount assigned, and decide whether it
is over- or underapplied:
Actual $220,000
Assigned 210,000
Balance (underapplied) $ 10,000

3. Kasper Company’s predetermined overhead rate is based on direct labor hours. At the
beginning of the current year, the company estimated that its manufacturing overhead
would total $440,000 during the year. During the year, the company incurred
$400,000 in actual manufacturing overhead costs. The Manufacturing Overhead
account showed that overhead was overapplied by $16,000 during the year. If the
predetermined overhead rate was $20.00 per direct labor hour, how many hours were
worked during the year?

Solution:

First, determine the amount of overhead applied to production by reference to the


information about the Manufacturing Overhead account:
Actual overhead – Amount applied to production = Amount over- (under)applied
$400,000 – Amount applied to production = $16,000
Amount assigned to production = $384,000

Then, solve for the direct labor hours here (the activity base for the overhead rate):
Predetermined overhead rate x Direct labor hours = Manufacturing overhead applied
$20.00/direct labor hour x Actual direct labor hours = $384,000 (from above)
Actual direct labor hours = 19,200

4. Under Horton Company's job-order costing system, manufacturing overhead is applied


to Work in Process inventory using a predetermined overhead rate. During July,
Horton’s transactions included the following:

Direct labor cost incurred $428,000


Direct materials issued to production 360,000
Indirect materials issued to production 32,000
Manufacturing overhead cost applied 452,000
Manufacturing overhead cost incurred 500,000

Horton Company had no beginning or ending inventories in July. What was the cost of
goods manufactured for July?

Solution:

Work in process, beginning of period $ 0


Direct materials issued to production 360,000
Direct labor cost incurred 428,000
Manufacturing overhead cost applied 452,000
Total manufacturing costs 1,240,000
Less: work in process, end of period (0)
Cost of goods manufactured $1,240,000

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