1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
ankoles [38]
2 years ago
14

Gene Simmons Company uses normal costing in each of its three manufacturing departments. Factory overhead is applied to producti

on on the basis of machine hours in Department A, direct labor cost in Department B, and direct labor hours in Department C. The following annual, budgeted data is available for the year:
first column is dept a then b then c going left to right
Factory Overhead $380,000 $420,000 $510,000
Direct Labor Cost $480,000 $600,000 $600,000
Direct Labor Hours 40,000 18,000 25,000
Machine Hours 95,000 70,000 35,000
The following actual information is available for January of the current year for each department: first column is dept a then b then c going left to right
Direct Materials Used $31,700 $57,600 $44,600
Direct Labor Cost $28,125 $53,000 $50,400
Factory Overhead $35,640 $36,040 $38,220
Direct Labor Hours Used 1,250 2,300 2,100
Machine Hours Used 8,100 1,440 1,280
REQUIRED:
A. Assume that Gene Simmons Company uses actual costing.
1. Compute the actual overhead rate for January for each department. Dept A Dept B Dept C
2. If one of the units produced in Department A used 650 machine hours, how much overhead cost would be applied to that unit?
3. What two disadvantages are associated with actual costing?
Assume that Gene Simmons Company uses normal costing.
1. How does normal costing "solve" the two problems associated with actual costing?
2. Compute the pre-determined annual overhead rate for the current year for each department. Dept A Dept B Dept C
3. Compute the manufacturing overhead applied in January in each department. Dept A Dept B Dept C
4. Compute under- or over-applied overhead at the end of January in each department. Dept A Over or Under (circle one) Dept B Over or Under (circle one) Dept C Over or Under (circle one)
5. On January 31, how will the balances of the Factory Overhead accounts be reported on the financial statements?
6. On December 31 (the end of the year), how will the balances of the Factory Overhead accounts be reported on the financial statements?
Business
1 answer:
kolbaska11 [484]2 years ago
7 0

Answer:

<u>Required A</u>

Part 1

<em>Actual overhead rate = Actual Overheads ÷ Actual hours used</em>

Therefore,

Dep A = $35,640 ÷ 8,100 = $4.40

Dep B = $36,040 ÷ 1,440 = $25.03

Dep C = $38,220 ÷ 1,280 = $29.86

Part 2

<em>Overheads applied = Overhead rate × hours used</em>

Therefore,

Overheads applied = $4.40 × 650 hours = $2,860

Part 3

1. Actual costing delays product costing as the information is only available after the period.

2. Difficult to deal with for fluctuating or seasonal sales as new rates always need to be calculated.

<u>Required B</u>

Part 1

1. Product Costing can be done on time hence price setting can also be done at an earlier stage.

2. Rates are determined consistently for fluctuating or seasonal sales

Part 2

<em>Predetermined overhead rate = Budgeted Overheads ÷ Budgeted hours </em>

Therefore,

Dep A = $380,000 ÷ 95,000 = $4.00

Dep B = $420,000 ÷ 70,000 = $6.00

Dep C = $510,000 ÷ 35,000 = $14.57

Part 3

<em>Overheads applied = Predetermined overhead rate × hours used</em>

Therefore,

Overheads applied for January,

Department A = $4.00 × 8,100 hours = $32,400

Department B = $6.00 × 1,440 hours = $8,640

Department C = $14.57 × 1,280 hours = $18,649.60

Part 4

If <em>Actual Overheads > Applied Overheads</em>, we say overheads are under-applied,

and

If <em>Applied Overheads > Actual Overheads</em>, we say overheads are over-applied.

Therefore,

<u>Department A :</u>

Actual Overheads = $35,640

Applied Overheads = $32,400

Therefore, overheads are under-applied by $3,240

<u>Department B :</u>

Actual Overheads = $36,040

Applied Overheads = $8,640

Therefore, overheads are under-applied by $27,400

<u>Department C :</u>

Actual Overheads = $38,220

Applied Overheads = $18,649.60

Therefore, overheads are under-applied by $19,570.40

Part 5

<u>Department A</u>

Cost of Sales = $3,240

<u>Department B</u>

Cost of Sales = $27,400

<u>Department C</u>

Cost of Sales = $19,570.40

Part 6

<u>Department A</u>

Cost of Sales = $3,240

<u>Department B</u>

Cost of Sales = $27,400

<u>Department C</u>

Cost of Sales = $19,570.40

Explanations :

See the formulas and calculations tied together with the solution above.

Note that :

If <em>Actual Overheads > Applied Overheads</em>, we say overheads are under-applied,

and

If <em>Applied Overheads > Actual Overheads</em>, we say overheads are over-applied.

Also that ,

Balances in the Overheads Account are closed off against the Cost of Goods Sold in the Income Statement.

 

You might be interested in
Janes Company provided the following information on intangible assets: A patent was purchased from the Lou Company for $1,100,00
juin [17]

Answer:

Please find attached Balance sheet.

Explanation:

4 0
3 years ago
Parr Hardware Store had net credit sales of $6.5mil and cost of goods sold of $5mil for the year. The Accounts Receivable balanc
kifflom [539]

Answer:

Accounts Receivables Turnover Ratio = \frac{6,500,000}{650,000} = 10 times.

Explanation:

Accounts Receivables Turnover ratio = \frac{Net \:Credit \: Sales}{Average \: Receivables}

Here Net Credit Sales = $6.5 million

Accounts Receivables Opening Balance = $600,000

Accounts Receivables Closing Balance = $700,000

Average Accounts Receivable Balance = \frac{600,000 \:+ 700,000}{2} = 650,000

Accounts Receivables Turnover Ratio = \frac{6,500,000}{650,000} = 10 times.

This shows that accounts receivables are on an average 1/10th of credit sales.

Final Answer

Accounts Receivables Turnover Ratio = \frac{6,500,000}{650,000} = 10 times.

3 0
3 years ago
What is the best way to avoid misusing words in your business and technical writing
Dafna11 [192]
I would say C or D. Remember, bombastic words are not required.
7 0
3 years ago
Read 2 more answers
An economist would say food stamps, Medicaid, and rent vouchers are ---41---​
Minchanka [31]

Answer:

Dr. Neil would be very disappointed in you.

Explanation:

He just would.

8 0
3 years ago
Beta Company leased equipment from Summer Industries. The lease agreement qualifies as a finance lease and requires annual lease
Tamiku [17]

Answer:

Total increase in pretax earnings on Summer’s December 31, 2019, income statement is $20,253

Explanation:

Fair value of asset sold on lease = Present value of lease payments = $50,000 * Cumulative PV factor at 6% for 8 periods of annuity due

= $50,000 * 6.20979

= $310,490

Interest income for 2019 = ($310490 - $50,000) * 6% = $15,629

Total increase in pretax earnings on Summer’s December 31, 2019, income statement = $310490 - $300,000 + $15,629 - 5866 = $20,253

3 0
3 years ago
Other questions:
  • Communication apprehension is also know as stage fright. True or false
    8·1 answer
  • Guillen, Inc. began work on a $7,000,000 contract in 2020 to construct an office building. Guillen uses the completed-contract m
    11·1 answer
  • Identify two new pieces of financial information that you learned about this week that will help you make informed financial dec
    13·1 answer
  • What is the maker movement? (A) Systems used to create the digital designs and then manufacture the products.(B) Serialization o
    5·1 answer
  • Children with visual impairments tend to be more______ in social environments
    12·1 answer
  • The extent to which a job requires that a worker perform all the activities that are required to complete a job is called:
    15·1 answer
  • Third Parties In General (not Just With Health Care) Are Inefficient Because
    6·1 answer
  • Which speaker is most likely to make high-risk investments?
    8·1 answer
  • A social media ad costs $2 per person reached and 60% purchase. A traditional media ad costs $0.10 per person
    10·1 answer
  • ________ means selling goods and services to ultimate consumers over the internet.
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!