Analysis of Overhead Using a Predetermined Rate UCD Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply...

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Analysis of Overhead Using a Predetermined Rate


UCD Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply overhead to individual jobs. An estimate of overhead costs at different volumes was prepared for the current year as follows:






























Direct labor-hours



30,000



40,000



50,000



Variable overhead costs



$360,000



$480,000



$ 600,000



Fixed overhead costs



500,000



500,000



500,000



Total overhead



$860,000



$980,000



$1,100,000



The expected volume is 40,000 direct labor-hours for the entire year. The following information is for October, when jobs 1011 and 1015 were completed.










































































































































Inventories, October 1





Raw materials and supplies



$ 42,000



Work in process (Job 1011)



91,300



Finished goods



227,900



Purchases of raw materials and supplies





Raw materials



629,000



Supplies



79,300



Materials and supplies requisitioned for production





Job 1011



281,000



Job 1015



234,500



Job 1017



47,200



Supplies



76,700





$639,400



Machine-hours (MH)





Job 1011



6,200 MH



Job 1015



6,100 MH



Job 1017



3,700 MH



Direct labor-hours (DLH)





Job 1011



14,000 DLH



Job 1015



6,100 DLH



Job 1017



3,700 DLH



Labor costs





Direct labor wages (all hours @ $12)



$285,600



Indirect labor wages (12,000 hours)



63,000



Supervisory salaries



128,000



Building occupancy costs (heat, light, depreciation, etc.)





Factory facilities



36,900



Sales and administrative offices



14,200



Factory equipment costs





Power



21,800



Repairs and maintenance



8,200



Other



9,900





$ 39,900



Required


Answer the following questions.


a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year.


b. Compute the total cost of Job 1011 when it is finished.


c. How much of factory overhead cost was applied to Job 1017 during October?


d. What total amount of overhead was applied to jobs during October?


e. Compute actual factory overhead incurred during October.


f. At the end of the year, UCD Company had the following account balances:




























Balance



Underapplied Overhead



$ 3,000,000



Cost of Goods Sold



28,000,000



Work-in-Process Inventory



4,000,000



Finished Goods Inventory



8,000,000



How would you recommend treating the Underapplied Overhead? Show the effect on the account balances in the following table.






















Overapplied Overhead



_________



Cost of Goods Sold



_________



Work-in-Process Inventory



_________



Finished Goods Inventory



_________


Answered Same DayDec 24, 2021

Answer To: Analysis of Overhead Using a Predetermined Rate UCD Company uses a job costing accounting system for...

Robert answered on Dec 24 2021
116 Votes
(a) Computation of predetermined overhead.We get,
(a) Computation of predetermined overhead.We get,

Predetermined overhead rate = Total overhead cost / Total Machine hours = 980,000 / 40,000 = $ 24.5
   Hence, the predetermined overhead rate is $ 24.5
(b) Computation of the the total cost of Job 1011 when it is finished.We...
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