| 1) Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $302,400 for the year, and machine usage is estimated at 126,000 hours. |
| For the year, $319,510 of overhead costs are incurred and 131,200 hours are used. |
| (a) |
| Compute the manufacturing overhead rate for the year. (Round answers to 2 decimal places, e.g. 1.25.) |
| (b) |
| What is the amount of under- or overapplied overhead at December 31? |
| (c) Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold. |
| 2) The ledger of Custer Company has the following work in process account. |
| Work in Process—Painting |
| 5/1 Balance 3,960 5/31Transferred out? |
| 5/31 Materials 5,770 |
| 5/31 Labor 4,330 |
| 5/31 Overhead 1,710 |
| 5/31 Balance ? |
| Production records show that there were 410 units in the beginning inventory, 30% complete, 1,510 units started, and 1,400 units transferred out. The beginning work in process had materials cost of $2,240 and conversion costs of $1,720. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process. |
| (a) How many units are in process at May 31? |
| (b) What is the unit materials cost for May? |
| (c) What is the unit conversion cost for May? |
| 3) Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations. |
| Standard |
| Custom |
| Direct labor costs$41,000$100,000 |
| Machine hours1,1001,140 |
| Setup hours95420 |
| Total estimated overhead costs are $305,200. Overhead cost allocated to the machining activity cost pool is $199,700, and $105,500 is allocated to the machine setup activity cost pool. |
| (a) Compute the overhead rate using the traditional (plantwide) approach. |
| (b) Compute the overhead rates using the activity-based costing approach. |
| (c) Determine the difference in allocation between the two approaches. |
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