Principles of Cost Accounting: Week 4 Homework (P4-4, P4-5, P4-10)

Principles of Cost Accounting
Week 4 Homework (P4-4, P4-5 and P4-10)

P 4-4
Listed below are the budgeted factory overhead costs for 2011 for Muncie Manufacturing, Inc. at the projected level of 2,000 units:
Indirect materials 10,000
Indirect labor 20,000
Power 15,000
Straight-line depreciation 30,000
Factory property Tax 28,000
Factory Insurance 12,000
Total 115,000

Prepare flexible budgets for factory overhead at the 1,000, 2,000, and 4,000 unit levels. (Hint: You must first decide which of the listed costs should be considered variable and which should be fixed.)

Cake Products Inc, is divided into five departments, mixing, blending, finishing, factory office and building maintenance. The first three departments are engaged in production work. Factory Office and Building Maintenance are service departments. During the month of June, the following factory overhead was incurred for the various departments:
mixing 21,000 factory office 9,000
Blending 18,000 building maintenance 6,400
finishing 25,000
The bases for distributing service department expenses to the other departments follow:
Building maintenance - on the basis of floor space occupied by the other departments as follows: mixing 10,000 sq ft, blending $4,500 sq ft, finishing 10,500 sq ft and factory office 7,000 sq ft.
Factory office - on the basis of number of employees as follows : mixing 30, blending 20 and finishing 50

Prepare schedules showing the distribution of the service departments expenses for the following:
1. The direct distribution method
2. The sequential distribution method in the order of number of other departments served.

P4-10 Con-Aggie Manufacturing Company is studying the results of applying factory overhead to production. The following data have been used: estimated factory overhead: $60,000; estimated materials costs, $50,000; estimated direct labor costs $60,000; estimated direct labor hours 10,000; estimated machine hours 20,000; work in process at the beginning of the month, none.
The actual factory overhead incurred for the month of November was $75,000, and the production statistics on November 30 are as follows:
Job Materials Cost Direct Labor Costs Direct Labor Hours Machine Hours Date Jobs Completed
101 5,000 6,000 1,000 3,000 10-Nov
102 7,000 12,000 2,000 3,200 14-Nov
103 8,000 13,500 2,500 4,000 20-Nov
104 9,000 15,600 2,600 3,400 In process
105 10,000 29,000 4,500 6,500 26-Nov
106 11,000 2,400 400 1,500 In process
Total 50,000 78,500 13,000 21,600

Required: 1. Compute the predetermined rate, based on the following: a. direct labor cost, b. direct labor hours, c. machine hours. 2. Using each of the methods, compute the estimated total cost of each job at the end of the month. 3. Determine the under- or overapplied factory overhead, in total, at the end o fthe month under each of the methods.
4. Which method would you recommend, and why?
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