Exam 6: Fundamentals of Product and Service Costing

A hybrid costing system that is often used when manufacturing goods that have some common characteristics plus some individual characteristics is called:

The only purpose of cost information is to determine the individual product cost on a per unit basis in order to value inventory.

Ryan & Marks, Design Consultants, has the following budget for the year: Direct labor (for professional hours charged to clients) \ 202,000 Overhead Indirect materials 10,000 Indirect labor 150,000 Depreciation - Building 50,000 Depreciation - Furniture 5,000 Utilities 12,000 Insurance 4,800 Property taxes 5,200 Other expenses Total The firm uses direct labor as the cost driver to apply overhead to clients. During January, the firm worked for many clients; data for two of them follow: Henderson account: Direct materials \4 00 Direct labor 3,000 Fisher account: Direct materials \5 ,380 Direct labor 12,600 Required: (a) Compute the company'sRyan & Marks budgeted overhead rate. Explain how this is used. (b) Compute the amount of overhead to be charged to the Henderson and Fisher accounts using the predetermined overhead rate calculated in requirement (a). (c) Compute the separate job cost for the Henderson and Fisher accounts.

Fortify, Inc. uses a predetermined manufacturing overhead rate based on direct labor hours to apply its indirect product costs to jobs. The following information has been collected for the previous year: Direct materials \ 150,000 Direct labor 200,000 Sales commissions 100,000 Indirect labor 50,000 Rent on office equipment 25,000 Depreciation - factory building 75,000 Utilities - factory 125,000 Fortify used 25,000 direct labor hours and 50,000 machine hours during the previous year. What is the predetermined overhead rate per direct labor hour?

If a company has three cost pools, it should have three different cost allocation bases.

The following information has been gathered for the Harrell Manufacturing Company for its fiscal year ending December 31: Actual manufacturing overhead costs \ 212,500 Actual direct labor hours 54,900 Actual direct labor costs \ 445,000 Estimated manufacturing overhead costs \ 210,000 Estimated direct labor \ 434,000 Estimated direct labor hours 56,000 - What is the predetermined manufacturing overhead rate, assuming direct labor cost is used as the activity base?

Pierce Carts produces three models of push carts, the Economy, the Standard, and the Deluxe. Data on operations and costs for the month are: Required: Compute the total cost for each model, assuming Pierce Carts uses: (a) Direct labor hours to allocate overhead costs. (b) Direct labor costs to allocate overhead costs. (c) Machine hours to allocate overhead costs.

Airborne Industries uses a two-stage allocation method to assign costs to its products. The following information has been provided for the month: Required: (a) Allocate the manufacturing overhead to two cost pools: machine-related and labor-related. (b) Compute the predetermined overhead rate for the two pools, using machine hours and direct labor cost as the bases. (c) Compute the unit cost of production for each of the three products.

For which of the following businesses would a job costing system be appropriate?

Job 434 was recently completed. The following data have been recorded on its job cost sheet: The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $12 per machine-hour. Required: Compute the unit product cost that would appear on the job cost sheet for this job.

Case (A) Case (B) Case (C) Beginning Balance (BB) ? \8 ,630 \ 71,600 Ending Balance (EB) 34,360 ? 75,100 Transferred In (TI) 194,600 42,600 ? Transferred Out (TO) 192,800 46,500 181,900 - For Case (C) above, what is the Transferred-In (TI)?

Nash Company manufactured two products, A and B, during April. For purposes of product costing, an overhead rate of $2.50 per direct-labor hour was used, based on budgeted annual factory overhead of $500,000 and 200,000 budgeted annual direct-labor hours, as follows: Budgeted Budgeted Overhead Hours Department 1 \ 300,000 100,000 Department 2 200,000 100,000 Total \ 500,000 200,000 The number of labor hours required to manufacture each of these products was: Product A Product B Department 1 1 Department 2 1 Total 4 4 During April, production units for products A and B were 1,000 and 3,000, respectively. Required: (a) Using a plant-wide overhead rate, what are total overhead costs assigned to products A and B, respectively? (b) Using departmental overhead rates, what are total overhead costs assigned to products A and B, respectively? (c) Assume that materials and labor costs per unit of Product A are $10 and that the selling price is established by adding 40% of absorption costs to cover profit and selling and administrative expenses. What difference in selling price would result from the use of departmental overhead rates?

At the beginning of the year, manufacturing overhead for the year was estimated to be $267,500. At the end of the year, actual direct labor-hours for the year were 22,100 hours, the actual manufacturing overhead for the year was $262,500, and manufacturing overhead for the year was overapplied by $13,750. If the predetermined overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the beginning of the year used in the predetermined overhead rate must have been:

If costs are allocated on a somewhat arbitrary base, what purpose does computing product costs have?

Case (A) Case (B) Case (C) Beginning Balance (BB) \ 36,520 \ 15,100 \ 5,600 Ending Balance (EB) ? 11,400 12,200 Transferred In (TI) 166,200 ? 68,400 Transferred Out (TO) 164,400 93,200 ? - For Case (B) above, what is the Transferred-In (TI)?

The Work in Process inventory account of a manufacturing firm shows a balance of $3,000 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $500 and $300 for materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:

The following information has been gathered for Foxmoor Industries for its fiscal year ending December 31: Estimated factory overhead costs \ 1,500,000 Actual factory overhead costs \ 1,776,400 Estimated labor hours 48,000 Actual labor hours 51,700 Estimated labor costs \ 756,000 Actual labor costs \ 840,125 Estimated machine hours 96,000 Actual machine hours 102,600 - What is the predetermined factory overhead rate per labor hour?

Case (A) Case (B) Case (C) Beginning Balance (BB) \ 36,520 \ 15,100 \ 5,600 Ending Balance (EB) ? 11,400 12,200 Transferred In (TI) 166,200 ? 68,400 Transferred Out (TO) 164,400 93,200 ? - For Case (C) above, what is the Transferred-Out (TO)?

The term "product" often refers to an organization's output and includes both tangible items (e.g., chair, desk, etc.) and intangible items (e.g., services provided).

Hyu Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 52,000 labor-hours. The estimated variable manufacturing overhead was $2.78 per labor-hour and the estimated total fixed manufacturing overhead was $1,192,360. The actual labor-hours for the year turned out to be 52,600 labor-hours. The predetermined overhead rate for the recently completed year was closest to: