Larkspur Corp. manufactures bird feeders. It currently has two product lines, the standard and the deluxe. Larkspur has a total of $184,060 in overhead.
The company has identified the following information about its overhead activity pools and the two product lines:
|
Activity Pools
|
Cost Driver
|
Cost
Assigned
to Pool
|
Quantity Consumed
by
Standard
|
Quantity Consumed
by
Deluxe
|
|
Material handling
|
Number of
moves
|
|
$
|
2,440
|
|
19 moves
|
42 moves
|
|
Quality control
|
Number of inspections
|
|
$
|
33,120
|
|
190 inspections
|
155 inspections
|
|
Machine
maintenance
|
Number of
machine hrs
|
|
$
|
148,500
|
|
4,600 machine hours
|
5,300 machine hours
|
Requirement 1:
Suppose Larkspur used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
|
|
Overhead assigned
|
|
|
Standard Model
|
$
|
|
|
|
Deluxe Model
|
$
|
|
|
|
Requirement 2:
|
Calculate the activity rates for each cost pool in Larkspur's ABC system.
Requirement 2:
Calculate the activity rates for each cost pool in Larkspur's ABC system.
|
Activity Rates
|
|
|
Material Handling
|
$
|
|
per move
|
|
|
Quality Control
|
$
|
|
per inspection
|
|
|
Maintenance
|
$
|
|
per machine hour
|
|
|
Requirement 3:
|
|
Calculate the amount of overhead that Larkspur will assign to the standard line if it uses an ABC system. (Omit the "$" sign in your response.)
|
|
Standard Model:
|
|
|
|
Material Handling
|
$
|
|
|
Quality Control
|
$
|
|
|
Maintenance
|
$
|
|
|
|
|
|
|
Total Overhead Assigned
|
$
|
|
Requirement 3:
Calculate the amount of overhead that Larkspur will assign to the standard line if it uses an ABC system.
Requirement 4:
Determine the amount of overhead Larkspur will assign to the deluxe line if it uses an ABC system.
|
Deluxe Model:
|
|
|
|
|
|
Material Handling
|
$
|
|
|
|
|
Quality Control
|
$
|
|
|
|
|
Maintenance
|
$
|
|
|
|
|
|
|
|
|
|
|
Total Overhead Assigned
|
$
|
|
|
|
2.
Tyler Tooling Company uses a job order costing system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $241,410 and total machine hours at 61,900. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:
|
|
Job 101
|
Job 102
|
Job 103
|
Total
|
|
Direct materials cost
|
$11,700
|
$7,500
|
$5,000
|
$24,200
|
|
Direct labor cost
|
$17,300
|
$5,100
|
$4,300
|
$26,700
|
|
Machine hours
|
1,300 hours
|
2,200 hours
|
1,000 hours
|
4,500 hours
|
|
|
Job 101 was completed and sold for $51,800.
Job 102 was completed but not sold.
Job 103 is still in process.
Actual overhead costs recorded during the first month of operations totaled $18,150.
Requirement 1:
Calculate the predetermined overhead rate.
Requirement 2:
Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations.
Requirement 3:
Compute the balance in the Work in Process Inventory account at the end of the first month.
Requirement 4:
How much gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead?
Requirement 5:
Determine the balance in the Manufacturing Overhead account at the end of the first month. Is it over- or underapplied?