| Scenario: | | | |
| Atchison Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows: |
| | | | |
| | | | |
| Direct labor-hours | 150,000 | 180,000 | 210,000 |
| | | | |
| Variable overhead costs | $1,155,000.00 | $1,386,000.00 | $1,617,000.00 |
| Fixed overhead costs | 712,800 | 712,800 | 712,800 |
| Total overhead | $1,867,800.00 | $2,098,800.00 | $2,329,800.00 |
| | | | |
| The expected volume is 180,000 direct labor-hours for the entire year. The following information is for September, when Jobs 6023 and 6024 were completed: |
| | | | |
| Inventories, September 1 | | |
| Materials and supplies | $ 31,500 | | |
| Work in process (Job 6023) | $162,000 | | |
| Finished goods | $337,500 | | |
| Purchases of materials and supplies | | |
| Materials | $445,500 | | |
| Supplies | $ 49,500 | | |
| Materials and supplies requisitioned for production | | |
| Job 6023 | $148,500 | | |
| Job 6024 | 123,750 | | |
| Job 6025 | 84,150 | | |
| Supplies | 19,800 | | |
| | $376,200 | | |
| Factory direct labor-hours (DLH) | | |
| Job 6023 | 10,500 DLH | | |
| Job 6024 | 9,000 DLH | | |
| Job 6025 | 6,000 DLH | | |
| Labor costs | | |
| Direct labor wages (all hours @ $9) | $229,500 | | |
| Indirect labor wages (12,000 hours) | 51,000 | | |
| Supervisory salaries | 118,800 | | |
| Building occupancy costs (heat, light, depreciation, etc.) | | |
| Factory facilities | $21,450 | | |
| Sales and administrative offices | 8,250 | | |
| Factory equipment costs | | |
| Power | 13,200 | | |
| Repairs and maintenance | 4,950 | | |
| Other | 8,250 | | |
| | $26,400 | | |
| | | | |
| REQUIRED | | | |
| Answer the following questions: | | | |
| | | | Answers |
| 1. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Note: Regardless of your answer to requirement [1], assume that the predetermined overhead rate is $10 per direct labor-hour. Use this amount in answering requirements [2] through [5].) | | |
| | | | |
| 2. Compute the total cost of Job 6023 when it is finished. | | |
| 3. How much of factory overhead cost was applied to Job 6025 during September? | | |
| 4. What total amount of overhead was applied to jobs during September? | | |
| 5. Compute actual factory overhead incurred during September. | | |
| | | | |
| 6. At the end of the year, Atchison Company had the following account balances: | | |
| | | | |
| Overapplied Overhead | $ 3,300 | | |
| Cost of Goods Sold | 3,234,000 | | |
| Work-in-Process Inventory | 125,400 | | |
| Finished Goods Inventory | 270,600 | | |
| | | | |
| How would you recommend treating the over applied overhead, assuming that it is not material? Show the new account balances in the following table: | | |
| | | | |
| Overapplied Overhead | | | |
| Cost of Goods Sold | | | |
| Work-in-Process Inventory | | | |
| Finished Goods Inventory | | | |
