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Cost Accounting and Overhead on Direct Labor Costs

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The following calendar year information about the Tahoma Corporation is available on December 31:

The company applies overhead on the basis of 125% of direct labor costs. Calculate the amount of over- or underapplied overhead.

Factory overhead costs:

Problem # 2
A company uses a process cost accounting system. The following information is available regarding direct labor for the current year:

(a) Calculate the equivalent units of production for direct labor for the year.
(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

Problem # 3
A retail store has three departments, A, B, and C, each of which has four full-time employees. The store does general advertising that benefits all departments. Advertising expense totaled $90,000 for the current year, and departmental sales were:

How much advertising expense should be allocated to each department?

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Solution Preview

Problem # 1
The following calendar year information about the Tahoma Corporation is available on December 31:

The company applies overhead on the basis of 125% of direct labor costs. Calculate the amount of over- or underapplied overhead.

Factory overhead costs:

Overapplied or under applied is the difference between applied overhead and actual overhead

Direct Labor cost = 142,600
Overhead applied = 142,600X1.25 = $178,250

Actual Overhead is
Depreciation on factory equipment 42,320
Factory ...

Solution Summary

The solution explains three problems - 1. Calculation of over-applied or under-applied overhead 2. Computation of equivalent units 3. Allocation of advertising costs.

$2.19