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ACCT346 Week 2 Homework Assignment

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ACCT346 Week 2 Homework Assignment

ACCT346 Week 2 Homework AssignmentQuestion 1. The Johnson Company applies a predetermined manufacturing overhead rate based ondirect labor hours to allocate (or charge) manufacturing overhead costs to the many differentproduction jobs it performs. For the most recent fiscal year, the company originally estimated that itwould incur $750,000 in total manufacturing overhead during the year and that a total of 250,000 directlabor hours would be worked. After the year was over, the company subsequently determined it hadactually incurred manufacturing overhead costs of $800,000 and 200,000 direct labor hours had beenworked during the year.Part A. What was the predetermined manufacturing overhead rate that the company originallycalculated and applied to each individual production job throughout the year? Remember that thecompany implements this rate based upon direct labor hours, so your answer will be expressed in dollarsper direct labor hour. Please show your calculation.Part B. What was the total amount of manufacturing overhead that was applied (allocated) toall of the production jobs that were worked throughout the year? Hint: you’ll need to use the answerfrom Part A above along with some of the other given data to help you calculate this.Part C. At the end of the year, the company was able to calculate, after the fact, how much ithad either under-allocated (under-applied) or over-allocated (over-applied) for its manufacturingoverhead for the year. How much was this amount? Also, be sure to additionally specify whether thisdollar amount was under-allocated or over-allocated. Hint: you’ll need to use the answer from Part Balong with some of the other given data to help you calculate this.Question 2. The following account balances and amounts for the month of January were obtained fromthe general ledger of the Smith Company.Beginning Work-in-Process (WIP) Inventory BalanceEnding WIP Inventory BalanceTotal Direct Material Costs Used in January ProductionTotal Direct Labor Costs for January Production$050,000150,00070,000Also note that the Smith Company applies a predetermined manufacturing overhead rate based ondirect labor costs (dollars) to allocate (or charge) manufacturing overhead costs to the many differentproduction jobs it performs. At the beginning of the year, the company originally budgeted $450,000 ofmanufacturing overhead for the year and estimated $150,000 of direct labor costs for the year.Part A. What was the predetermined manufacturing overhead rate that the company originallycalculated and applied to each individual production job throughout the year? Remember that thecompany implements this rate based upon direct labor costs (dollars), so this rate will be expressed aseither a percentage or a multiplier (e.g., 150% or a 1.5 times multiplier). Please show your calculation.Part B. What was the total amount of manufacturing overhead that was applied (allocated) toall of the production jobs worked for January? Hint: you can calculate this amount using the result fromPart A above along with the direct labor cost for January.Part C. Calculate the total manufacturing costs for the month of January. Hint: you’ll need touse the answer from Part B plus some other data provided above.Part D. Calculate the Cost of Goods Manufactured (COGM) for the month of January. Hint: you’llneed to use the answer from Part C plus some other data provided above.Question 3. The Jones Company manufactures two separate product lines: Segways and Hoverboards.The annual production and sales of Segways is 800 units, while 2,400 Hoverboards are produced andsold each year. The company has been using a traditional, fairly simplistic way of allocating (applying) itstotal manufacturing overhead costs between the Segway and Hoverboard product lines by simplyapportioning its total overhead expenses based upon the number of direct labor hours worked in thefactory for each of the two separate products.However, Jones’ management is now looking at the possibility of instead changing to an activity-basedcosting (ABC) approach for its products. To implement activity-based costing, the company has identifiedthree major cost pools comprising its manufacturing overhead: production line set-up costs, clean-upcosts, and tear-down costs. The following data table was compiled for these cost pools to summarize theestimated activity and associated expense amounts for the total annual overhead:Expected ActivityActivity Cost PoolProduction line set-up costsProduction line clean-up costsProduction line tear-down costsTotalOverheadCost$52,000$19,500$6,500Segways(# of “events”)Hoverboards(# of “events”)Total(# of “events”)6001506002,0005002,0002,6006502,600Note that there are three parts to this question and it extends onto the next page.Part A. Using the table of estimates provided above for the anticipated activities related to overhead,calculate the activity rate for each of the three cost pools. In other words, you will calculate threedifferent answers: the average cost (dollars) for each “set-up event,” cost for each “clean-up event,” andcost for each “tear-down event.”Part B. Specifically for the Hoverboards, what is the total activity-based cost for each of the threeindividual activity cost pools: the set-ups, clean-ups, and tear-downs? Show the calculation for each ofthese three activity totals. Hint: you’ll need to use results from Part A plus other data from the table.Part C. Specifically for the Hoverboards, what are the annual total overhead costs based upon theactivity-based costing analysis? Also, what is the overhead cost per unit (for Hoverboards)? Hint: you’llneed to use the results from Part B along with some other given data, and simply assume that the totaloverhead costs are comprised of the total set-up costs, clean-up costs, and tear-down costs.



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