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Business School ACCT1511 Accounting & Financial Management 1B

Summer, 2017-18

Topic 6A Practice Problem A 1.

Predetermined overhead rate = $675,000/75,000 = $9.00 per DLH

2.

Applied overhead = $9.00 x 75,700 = $681,300

3.

Applied overhead

4.

$681,300

Actual overhead

681,000

Overapplied overhead

$

Prime cost Applied overhead

300

$957,000 681,300 $1,638,300 / 400,000 = $4.10 (rounded)

5.

1. Predetermined overhead rate = $675,000/25,000 = $27 per MHr 2. Applied overhead = $27 x 25,050 = $676,350 3. Actual overhead

$681,000

Applied overhead

676,350

Underapplied overhead

$ 4,650

4. Prime cost

$957,000

1

Applied overhead

676,350 $1,633,350 / 400,000 = $4.08 (rounded)

Practice Problem B 1.

Journal Entries a.

Raw Materials

43,500

Accounts Payable b.

c.

43,500

Work in Process

35,000

Overhead Control

12,200

Raw Materials

35,000

Supplies

12,200

Work in Process

60,000

Overhead Control

20,000

Administrative Expenses

18,000

Selling Expense

9,000

Wages Payable d.

Overhead Control

107,000 8,500

Accumulated Depreciation e.

Overhead Control

f.

Overhead Control

g.

Overhead Control

Taxes Payable

450 6,200

Prepaid Insurance

6,200 6,200

Utilities Payable h.

Selling Expense

8,500

450

6,200 5,000

2

Advertising Payable i.

Administrative Expense Selling Expense

5,000 1,500 650

Accumulated Depreciation j.

Administrative Expense

k.

Work in Process

2,150

750

Legal Fees Payable

750 48,000

Overhead Control

* 48,000

*$6 x 8,000 = $48,000 l.

Finished Goods Work in Process

135,000 135,000

3

2. Raw Materials Beg. Bal. a.

5,000

b.

43,500

End. Bal. 13,500

Work in Process 35,000

Beg. Bal. 30,000 b.

35,000

c.

60,000

k.

48,000

Overhead Control

Beg. Bal. 60,000

b.

12,200

l.

c.

20,000

d.

8,500

End. Bal.195,000

135,000

End. Bal. 38,000

Finished Goods 135,000

l.

e.

450

f.

6,200

g.

6,200

End. Bal.

5,550 *

k.

48,000

* Underapplied overhead

3.

Bixby Products Pty. Ltd. Statement of Cost of Goods Manufactured For the Year Ended December 31, 2016

Direct materials Direct labour Overhead Supplies

$35,000 60,000 $12,200

4

Indirect labour Depreciation—Plant and equipment Property taxes Electricity—Factory Insurance Less: Underapplied overhead Overhead applied Manufacturing costs added Add: Beginning work in process Total manufacturing costs Less: Ending work in process Cost of goods manufactured

20,000 8,500 450 6,200 6,200 $53,550 5,550 48,000 $143,000 30,000 $173,000 38,000 $135,000

4. Cost of goods sold will increase by $5,550 if the overhead variance is all allocated to Cost of Goods Sold.

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