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Accounting : Overhead Costing

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There are 2 types of storage cabinets, type A and B. The manufacturer applies overhead on all units at rate of $80 per machine hour. Production info is this:
Type A Type B
Anticipated volume (units) 8,000 15,000
Direct material cost $35 $60
Direct labor cost $20 $20

There are three ABC overhead cost activities: manufacturing setups, machine processing, and product shipping. Info on these cost drivers are:

Type A Type B Total
Setup 50 30 80
Machine hours 16,000 22,500 38,500
Outgoing shipments 100 75 175

Total overhead = $3,080,000

That is split into: Manufacturing Setup = $672,000
Machine processing = $1,848,000
Product shipping = $560,000

a. find the unit manufacturing cost of Type A and B cabinets using the current overhead costing procedures.

b. Find the units manufacturing cost of these cabinets using ABC costing.

c.Is type A cabinets overstated or understated by the use of machine hours to allocate manufacturing overhead to production?

d.Should we give a $30 discount on Type A cabinents if the selling price is at $260 right now?

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Similar Posting

Cost accounting problems: 4-2, 4-16, 4-19, 4-20, 4-21

See attached file for clarity.

4- 2 How does a job-costing system differ from a process-costing system?

4- 16 Job costing, process costing. In each of the following situations, determine whether job costing or process costing would be more appropriate.

a. A CPA firm l. A landscaping company
b. An oil refinery m. A cola- drink- concentrate producer
c. A custom furniture manufacturer n. A movie studio
d. A tire manufacturer o. A law firm
e. A textbook publisher p. A commercial aircraft manufacturer
f. A pharmaceutical company q. A management consulting firm
g. An advertising agency r. A breakfast- cereal company
h. An apparel manufacturing plant s. A catering service
i. A flour mill t. A paper mill
j. A paint manufacturer u. An auto repair shop
k. A medical care facility

4- 19 Budgeted manufacturing overhead rate, allocated manufacturing overhead. Waheed Company uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine- hour. The following data are available for 2008:

Budgeted manufacturing overhead costs $ 4,000,000
machine- hours 200,000
Actual manufacturing overhead costs $ 3,860,000
Actual machine- hours 195,000

Required
1. Calculate the budgeted manufacturing overhead rate.
2. Calculate the manufacturing overhead allocated during 2008.
3. Calculate the amount of under- or overallocated manufacturing overhead.

4- 20 Job costing, accounting for manufacturing overhead, budgeted rates. The Lynn Company uses a job- costing system at its Minneapolis plant. The plant has a Machining Department and an Assembly Department. Its job- costing system has two direct- cost categories ( direct materials and direct manufacturing labor) and two manufacturing overhead cost pools ( the Machining Department overhead, allocated to jobs based on actual machine- hours, and the Assembly Department overhead, allocated to jobs based on actual direct manufacturing labor costs). The 2009 budget for the plant is:

Machining Department Assembly Department
Manufacturing overhead $ 1,800,000 $ 3,600,000
Direct manufacturing labor costs $ 1,400,000 $ 2,000,000
Direct manufacturing labor- hours 100,000 200,000
Machine- hours 50,000 200,000

Required
1. Present an overview diagram of Lynn's job- costing system. Compute the budgeted manufacturing over-head rate for each department.
2. During February, the job- cost record for Job 494 contained the following:
Machining Department Assembly Department
Manufacturing overhead $ 45,000 $ 70,000
Direct manufacturing labor costs $ 14,000 $ 15,000
Direct manufacturing labor- hours 1,000 1,500
Machine- hours 2,000 1,000

Compute the total manufacturing overhead costs allocated to Job 494.

3. At the end of 2009, the actual manufacturing overhead costs were $ 2,100,000 in Machining and $ 3,700,000 in Assembly. Assume that 55,000 actual machine- hours were used in Machining and that actual direct manufacturing labor costs in Assembly were $ 2,200,000. Compute the over- or underallocated manufacturing overhead for each department.

4- 21 Job costing, consulting firm. Taylor & Associates, a consulting firm, has the following condensed budget for 2009:

Revenues $ 20,000,000
Total costs:
Direct costs
Professional Labor $ 5,000,000
Indirect costs
Client support 13,000,000 18,000,000
Operating income 2,000,000

Taylor has a single direct-cost category (professional labor) and a single indirect-cost pool (client support). Indirect costs are allocated to jobs on the basis of professional labor costs.

Required
1. Prepare an overview diagram of the job- costing system. Compute the 2009 budgeted indirect- cost rate for Taylor & Associates.
2. The markup rate for pricing jobs is intended to produce operating income equal to 10% of revenues. Compute the markup rate as a percentage of professional labor costs.
3. Taylor is bidding on a consulting job for Red Rooster, a fast- food chain specializing in poultry meats. The budgeted breakdown of professional labor on the job is as follows:

Professional Labor Category Budgeted Rate per Hour Budgeted Hours Director
Director $ 200 3
Partner 100 16
Associate 50 40
Assistant 30 160

Compute the budgeted cost of the Red Rooster job. How much will Taylor bid for the job if it is to earn its target operating income of 10% of revenues?

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