Question 1: Elliot Company estimates that costs of production for the coming year would be:
Raw materials $75,000
Direct labor 90,000
Production overhead 135,000
a) Calculate the overhead rate for the next year, assuming that it is based on direct labor dollars.
b) Journalize the entry necessary to show the total cost of production for the month of May if the raw materials put into production totaled $6,000 and direct labor was $6,600.
c) If actual production overhead costs incurred in May were $9,550, calculate the overabsorbed overhead for the month.
Question 2: The adjusted trial balance of Ryan Corporation includes the following overhead costs that are to be distributed before the books are closed to its three cost centers: A, B, and C.
Total Building Furniture and Fixtures Machinery and Equipment
Heat, light, power $40,000
Depreciation 23,8000 $3,000 $800 $20,000
Insurance:
Inventories 200
Other 2,210 1,300 60 580
Repairs 5,900 4,000 1,900
Telephone Expense 1,800
Total 73,910
Data used for cost distribution follow:
Cost Center
A B C
Cubic feet 600,000 200,000 200,000
square feet of floor space 48,000 6,000 6,000
Number of telephone extensions 9 27 9
Three-fourths of the furniture and fixtures are in Cost Center B and one-fourth is in cost Center C. Half of the inventory is in Cost Center A and half is in Cost Center B. Assume that all building costs except utilities are allocated on the basis of floor space. Utilities are allocated based on cubic feet. All machinery and equipment are in Cost Center A.
Calculate the amount of cost to be allocated to each cost center.