This Website Has Been Moved to a New Link


Riverside Company manufactures two sizes of T-shirts

Price: $7.99

Problem 1
Jackson uses a predetermined overhead rate. Overhead for the next
twelve months is estimated to be $400,000. Jackson applies overhead as a
percentage of direct labor cost. Direct labor costs are estimated to be $500,000
for the next year. During the year actual direct labor costs amounted to
$520,000 and the actual overhead was as follows:

Maintenance $20,000
Indirect materials $20,000
Indirect labor $90,000
Factory rent $80,000
Depreciation $110,000
Payroll taxes $80,000
Other $20,000
Total $420,000

Calculate the over-/underapplied overhead for the year.

Problem 2
Arnold Company manufactured two products, A and B, during April.
For purposes of product costing, an overhead rate of $2.50 per direct-labor hour
was used, based on budgeted annual factory overhead of $500,000 and 200,000
budgeted annual direct-labor hours, as follows:

Budgeted overhead Budgeted Hours
Department 1 $300,000 100,000
Department 2 $200,000 100,000
Total $500,000 200,000

The number of labor hours required to manufacture each of these
products was:

Problem A Product B
Department 1 3 1
Department 2 1 3
Total 4 4

During April, production units for products A and B were 1,000 and 3,000.

1) Using a plantwide overhead rate, what are total overhead costs assigned to
products A and B, respectively?
2) Using departmental overhead rates, what are total overhead costs assigned to
products A and B, respectively?
3) Assume that materials and labor costs per unit of Product A are $10 and that
the selling price is established by adding 40 percent of absorption costs to
cover profit and selling and administrative expenses. What difference in selling
price would result from the use of departmental overhead rates?

Problem 3
Riverside Company manufactures two sizes of T-shirts, medium and
large. Both sizes go through cutting, assembling and finishing departments. The
company uses operation costing. Riverside Company's conversion costs applied to
products for June were: Cutting Department $60,000, Assembling Department
$60,000, and Finishing Department $30,000. June had no beginning or ending
work-in-process inventory. The quantities and direct materials costs for June

Job # Size Quantity Direct Materials
601 Medium 10,000 $50,000
602 Large 20,000 $110,000

Each T-shirt, regardless of size, required the same cutting, assembling and finishing operations. Compute both unit cost and total cost for each shirt size produced in June.

No comments:

Post a Comment