Problem: Triple Play Sports manufactures baseball gloves. Information related to a recent production period is as follows:
Estimated manufacturing overhead, 2004 = $100,000
Estimated machine hours, 2004 = 4,000
Direct labor cost, October = $5,000
Direct materials cost, October = $5,000
Supervisor's salary, October = $4,000
Factory rent, October = $1,000
Factory utilities, October = $1,000
Indirect materials cost, October = $1,400
Machine hours worked, October = 300
During October, 2,000 gloves were produced
Q1. Using actual costing, what is the unit cost of one glove produced during October.
Q2. Using normal costing, with machine hours as the activity base, what is the unit cost of one glove produced during October.
Q3. If normal costing is used, was manufacturing overhead over or underapplied during September. By how much?
Q4. What might have caused the amount of overhead applied to be different from the actual amount.
Q5. Why would managers at Triple Play Sports choose to use normal costing rather than actual costing.