Developing and Using a Predetermined Overhead Rate
Assume that the following predictions were made for 2009 for one of the plants of Milliken & Company:
| Total manufacturing overhead for the year | $44,000,000 |
| Total machine hours for the year | 2,000,000 |
Actual results for February 2009 were as follows:
| Manufacturing overhead | $5,480,000 |
| Machine hours | 310,000 |
(a) Determine the 2009 predetermined overhead rate per machine hour.
(b) Using the predetermined overhead rate per machine hour, determine the manufacturing overhead applied to Work-in-Process during February.
(c) As of February 1, actual overhead was underapplied by $500,000. Determine the cumulative amount of any overapplied or underapplied overhead at the end of February.
Analyzing Activity in Inventory Accounts
Selected data concerning operations of Cascade Manufacturing Company for the past fiscal year follow:
| Raw materials used | $300,000 |
| Total manufacturing costs charged to production during the year (includes raw materials, direct labor, and manufacturing overhead applied at a rate of 60 percent of direct labor costs) |
681,000 |
| Cost of goods available for sale | 826,000 |
| Selling and general expenses | 30,000 |
| Inventories | ||
|---|---|---|
| Beginning | Ending | |
| Raw materials | $70,000 | $80,000 |
| Work-in-process | 85,000 | 30,000 |
| Finished goods | 90,000 | 110,000 |
Determine each of the following:
(a) Cost of raw materials purchased
(b) Direct labor costs charged to production
(c) Cost of goods manufactured
(d) Cost of goods sold
Minot Processing Company manufactures one product on a continuous basis in two departments, Processing and Finishing. All materials are added at the beginning of work on the product in the Processing Department. During December 2009, the following events occurred in the Processing Department:
| Units started | 16,000 units |
| Units completed and transferred to Finishing Department | 15,000 units |
| Costs assigned to processing: Raw materials (one unit of raw materials for each unit of product started) |
$142,900 |
| Manufacturing supplies used | 18,000 |
| Direct labor costs incurred | 51,000 |
| Supervisors’ salaries | 12,000 |
| Other production labor costs | 14,000 |
| Depreciation on equipment | 6,000 |
| Other production costs | 18,000 |
Additional information follows:
Minot uses weighted average costing and applies manufacturing overhead to Work-in-Process at the rate of 100 percent of direct labor cost.
Ending inventory in the Processing Department consists of 3,000 units that are one-third converted.
Beginning inventory contained 2,000 units, one-half converted, with a cost of $41,500 ($29,900 for materials and $11,600 for conversion).
(a) Prepare a cost of production report for the Processing Department for December.
| Minot Processing Company: Processing Department Cost of Production Report For the Month Ending December 31, 2009 |
||||
|---|---|---|---|---|
| Summary of units in process: | ||||
| Beginning | Answer | |||
| Units started | Answer | |||
| In process | Answer | |||
| Completed | Answer | |||
| Ending | Answer | |||
| Equivalent units in process: | Materials | Conversion | Total | |
| Units completed | Answer | Answer | ||
| Plus equivalent units in ending inventory | Answer | Answer | ||
| Equivalent units in process | Answer | Answer | ||
| Total cost to be accounted for and cost per equivalent unit in process: |
||||
| Beginning work-in-process | $Answer | $Answer | $Answer | |
| Current costs | Answer | Answer | Answer | |
| Total cost in process | $Answer | $Answer | $Answer | |
| Equivalent units in process | ÷Answer | ÷Answer | ||
| Cost per equivalent unit in process | $Answer | $Answer | $Answer | |
| Accounting for total costs: | ||||
| Transferred out | $Answer | |||
| Ending work-in-process: | ||||
| Materials | $Answer | |||
| Conversion | Answer | Answer | ||
| Total cost accounted for | $Answer | |||
(b) Prepare an analysis of all changes in Work-in-Process.
| Work-in-process: | ||||
| Beginning | $Answer | |||
| Current manufacturing costs: | ||||
| Direct materials | $Answer | |||
| Direct labor | Answer | |||
| Applied overhead | Answer | Answer | ||
| Total | $Answer | |||
| Cost of goods manufactured | Answer | |||
| Ending | $Answer |
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