Calculate the predetermined factory overhead rate

Question

Problem 1. Factory overhead for the Praeger Company has been estimated as follows:

Nonvariable overhead         $122,000 
Variable overhead               $ 90,500
Budgeted direct labor hours    50,000

Production for the month was 75 percent of the budget and actual factory overhead totaled $140,000

a. Calculate the predetermined factory overhead rate.

b. Calculate the under - or overapplied factory overhead.

Problem 2. Blaine Corporation uses a standard cost system and has established the following standards for one unit of product.

                               Standard Quantity       Standard Price         Standard Cost

Direct materials           10 pounds              $2.50 per pound            $ 25.00

Direct labor                  .25 hour                $10.00 per hour                2.50
                                                                                                   $ 27.50

During October, the company purchased 240,000 pounds of material at a total cost of $588,000. The total factory wages for October were $50,350. During October, 21,000 units of product were manufactured using 212,000 pounds of material and 5,300 direct labor hours.

1. Compute the material quantity and labor efficiency variances
2. Compute the material price and labor rate variances
3. Indicate whether each of the above variances is favorable or unfavorable

Problem 3: Information for the month of May concerning Department A, the first stage of the production cycle, is as follows:

                                                                               Materials           Conversion Costs

Beginning work in process                                          $ 7,200                      $ 6,000

Current costs                                                             27,800                       16,050

Material costs                                                            $ 35,000                    $ 22,050

Equivalent units base on average cost method               10,000                        9,800

 

Good completed                                                      9,000 units

Ending work in process                                               1,000

Material costs are added at the beginning of the process. The ending work in process is 80 percent complete as to conversion costs. How would the total costs accounted for be distributed using the average cost method?

Cost Accounting questions:

Question 1. What are the advantages and disadvantages of a stable production policy for a company that has greatly fluctuating sales during the year?

Question 2. When is it necessary to use separate equivalent production figures in computing the unit costs of materials, labor, and overhead?

Question 3. How does a just-in-time inventory system differ from more traditional approaches to costing?

Question 4. What factors should a service firm consider in deciding whether to use direct labor dollars or direct labor hours in charging overhead to jobs?

Question 5. Is a favorable variance necessarily good? Explain.