Calculate the total overhead costs

Question

Consider the following questions:

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1. KK Jewelry Company sells its product for $70 per unit. Variable manufacturing costs per unit are $20, and fixed manufacturing costs at the normal operating level of 5,000 units are $35,000. Variable expenses are $8 per unit sold. Fixed administration expenses total $40,000. KK Jewelry Company had no beginning inventory in 2018. During 2018, the company produced 5,000 units and sold 2,000.

a. What would the net income be for KK Jewelry Company in 2018 using variable costing?

b. What would the net income be for KK Jewelry Company in 2018 using absorption costing?

2. Robert Corporation has the following information for October, November, and December of the current year:

	October	November	December
Units produced	5,000	5,000	5,000
Units sold	2,000	4,500	7,000

Production costs per unit (based on 5,000 units) are as follows:

Direct labor	$ 4
Direct materials	6
Fixed factory overhead	3
Fixed SG&A expenses	2
Variable factory overhead	1
Variable SG&A expenses	5

There were no beginning inventories for October, and all units were sold for $25 each. Costs are stable over the three months. Calculate the reported amount of Robert's December ending inventory using the variable costing method.

3. Silver Streak Company manufactures two products, A and B, and incurs overhead costs in two production departments, Mixing and Filling. The annual overhead costs in each production department are as follows:

• Mixing Dept. overhead = $155,000 + $25per machine-hour

• Filling Dept. overhead = $280,000 + $60 per machine-hour

• Each unit of Product A requires 1 machine-hour in the Mixing Department and 3 hours in the Filling Department.

• Each unit of Product B requires 5 hours in the Mixing Department and 2 hours in the Filling Department.

During 2017, 30,000 units of A and 25,000 units of B were produced.

Calculate the total overhead costs assigned to a unit of Product B, assuming departmental overhead rates based on machine-hours are used.

4. Tiger Company has identified the following overhead costs and cost drivers for next year:

Overhead Item	Expected Costs	Cost Driver	Maximum Quantity
Setup costs	$583,200	Number of setups	2,400
Ordering costs	270,000	Number of orders	20,000
Maintenance	928,000	Machine-hours	32,000
Power	90,000	Kilowatt-hours	200,000

The following are two of the jobs completed during the year:

	Job 201	Job 202
Direct materials	$9,000	$10,000
Direct labor	$12,000	7,000
Units completed	750	600
Direct labor-hours	45	110
Number of setups	6	7
Number of orders	8	15
Machine-hours	180	150
Kilowatt-hours	90	120

Using Activity Based Costing, determine the unit cost for each job using the four cost drivers. (Round amounts to 2 decimal places.). Your answer should show the unit cost for Job 201 and the unit cost for Job 202.

5. The Helix Manufacturing Company has two Production Departments: Mixing and Molding. Each of these two departments uses the services provided by the Utilities and Human Resources Departments, which both support the production functions and each other's functions as well. Helix uses the direct method of allocating these service department costs to the production departments. Utilities are allocated on the basis of hours of department operations and Human Resources is allocated on the basis of departmental direct labor hours. Last period the following costs were recorded:

Mixing Department overhead	$500,000
Molding Department overhead	$700,000
Utilities Department total costs	$900,000
Human Resources Department total costs	$720,000

Production Department data:

	Mixing	Molding	Utilities	Human Resources
Hours of operation	5,000	10,000	30,000	5,000
Direct labor hours recorded	4,000	8,000	4,000	8,000

Determine the total overhead costs of the Mixing and Molding Departments if the direct method of allocating department costs is used. Your answer should show the TOTAL amount allocated to Mixing and the TOTAL amount allocated to Molding.

6. Eastern Springs Company uses two producing departments (A and B) and two service departments (S1 and S2). The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products. S1 costs are allocated based on the number of employees, S2 costs are allocated based on direct labor-hours, and the production departmental overhead rates are also based on direct laborhours.

The following data are available for a recent period:

	S1	S2	A	B
Direct department costs	$48,000	$72,000	$140,000	$235,000
Number of employees	2	3	12	18
Direct laborhours	450	325	2,250	1,800

The department providing the greatest percentage of interdepartmental services to other service departments is to be allocated first.

Determine the overhead rates per direct laborhour for Departments A and B. Your answer is to show the rate for Department A and the separate rate for Department B.