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E15-5 E16-3 E17-1

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E15-5 Duggan Company applies manufacturing overhead to jobs on the basis of machine
hours used. Overhead costs are expected to total $325,000 for the year, and machine usage
is estimated at 125,000 hours.
For the year, $342,000 of overhead costs are incurred and 130,000 hours are used.

Instructions
(a) Compute the manufacturing overhead rate for the year.
(b) What is the amount of under- or overapplied overhead at December 31?
(c) Prepare the adjusting entry to assign the under- or overapplied overhead for the year
to cost of goods sold.

E16-3 The ledger of Custer Company has the following work in process account.

Production records show that there were 400 units in the beginning inventory, 30% complete,
1,400 units started, and 1,500 units transferred out. The beginning work in process
had materials cost of $2,040 and conversion costs of $1,550. The units in ending inventory
were 40% complete. Materials are entered at the beginning of the painting process.

Instructions
(a) How many units are in process at May 31?
(b) What is the unit materials cost for May?
(c) What is the unit conversion cost for May?
(d) What is the total cost of units transferred out in May?
(e) What is the cost of the May 31 inventory?

E17-1 Wilkins Inc. has two types of handbags: standard and custom. The controller has
decided to use a plantwide overhead rate based on direct labor costs. The president has
heard of activity-based costing and wants to see how the results would differ if this system
were used. Two activity cost pools were developed: machining and machine setup.
Presented below is information related to the company’s operations.


  Standard  Custom 
Direct labor costs   50,000  100,000
Machine hours   1,000  1,000
Setup hours   100  400

Total estimated overhead costs are $270,000. Overhead cost allocated to the machining activity
cost pool is $170,000, and $100,000 is allocated to the machine setup activity cost pool.

Instructions
(a) Compute the overhead rate using the traditional (plantwide) approach.
(b) Compute the overhead rates using the activity-based costing approac

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