138) Oakland Company is debating the use of direct labor cost or direct labor hours as the cost

allocation base for allocating manufacturing overhead. The following information is available for the
most recent year:

Estimated direct labor cost $560,000

Actual direct labor cost $475,000
Estimated manufacturing overhead costs $420,000
Actual manufacturing overhead costs $353,000
Estimated direct labor hours 200,000
Actual direct labor hours 280,000

Determine the following:

a) Predetermined manufacturing overhead rate using direct labor cost as the allocation base
b) Predetermined manufacturing overhead rate using direct labor hours as the allocation base
c) Allocated manufacturing overhead costs based on direct labor cost for the year
d) Allocated manufacturing overhead costs based on direct labor hours for the year
Answer:
Part a
Estimated manufacturing overhead costs divided by $420,000
Estimated direct labor cost $560,000
Predetermined manufacturing overhead rate based on direct labor cost 75%

Part b
Estimated manufacturing overhead costs divided by $420,000
Estimated direct labor hours $200,000
Predetermined manufacturing overhead rate based on direct labor
hours $2.10

Part c
Estimated manufacturing overhead costs divided by $420,000
Estimated direct labor cost $560,000
Predetermined manufacturing overhead rate based on direct labor cost 75%

Actual direct labor cost $475,000

Predetermined manufacturing overhead rate based on direct labor cost × 75%
Allocated manufacturing overhead costs based on direct labor cost $356,250

Part d
Estimated manufacturing overhead costs divided by $420,000
Estimated direct labor hours $200,000
Predetermined manufacturing overhead rate based on direct labor
hours $2.10

Actual direct labor hours $280,000

Predetermined manufacturing overhead rate based on direct labor
hours $ × 2.10
Allocated manufacturing overhead costs based on direct labor hours $588,000
Diff: 2
139) Grassland Corporation had actual manufacturing overhead costs of $32,500 for the past year.
Direct labor cost is $12.00 per hour. Manufacturing overhead is allocated at a rate of $4.00 per direct
labor hour. Manufacturing overhead was overallocated for the year by $2,500.

Calculate:
a. Allocated manufacturing overhead costs for year
b. Actual number of direct labor hours worked in year
Answer:
Part a
Actual manufacturing overhead costs for year $32,500
Overallocated manufacturing overhead costs for year $2,500
Allocated manufacturing overhead costs for year $35,000

Part b
Actual manufacturing overhead costs for year $32,500
Overallocated manufacturing overhead costs for year $2,500
Allocated manufacturing overhead costs for year $35,000

Allocated manufacturing overhead costs for year divided by $35,000

Manufacturing overhead allocation rate per direct labor
hour $4.00
Actual number of direct labor hours worked during year 8,750
Diff: 2
LO: 3-3
EOC: E3-18A
AACSB: Analytical thinking
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and allocate
indirect costs.

140) Calculate the unknowns for the following independent situations.

1. Selected data for Lion Corporation:

Actual manufacturing overhead costs $35,400

Underallocated manufacturing overhead costs $3,000

Allocated manufacturing overhead is based on 50% of direct labor cost.

a. Calculate the allocated manufacturing overhead cost.

b. Calculate the direct labor cost.

2. Selected data for Tiger Corporation:

Actual manufacturing overhead costs $24,300

Overallocated manufacturing overhead costs $1,200

Manufacturing overhead is allocated at $15 per machine hour.

a. Calculate the allocated manufacturing overhead cost.

b. Calculate the number of machine hours incurred.
Answer:
Part 1a
Actual manufacturing overhead costs $35,400
Underallocated manufacturing overhead costs $(3,000)
Allocated manufacturing overhead costs $32,400

Part 1b
Actual manufacturing overhead costs $35,400
Underallocated manufacturing overhead costs $(3,000)
Allocated manufacturing overhead costs $32,400

Allocated manufacturing overhead costs divided by $32,400

Allocated manufacturing overhead rate based on direct labor cost 50%
Direct labor cost $64,800

Part 2a
Actual manufacturing overhead costs $24,300
Overallocated manufacturing overhead costs $1,200
Allocated manufacturing overhead costs $25,500

Part 2b
Actual manufacturing overhead costs $24,300
Overallocated manufacturing overhead costs $1,200
Allocated manufacturing overhead costs $25,500

Allocated manufacturing overhead costs divided by $25,500

Allocated manufacturing overhead rate based on machine hours $15
Machine hours 1,700
Diff: 2
193) Hardrock Company uses job costing. Hardrock Company has two departments, Sanding and
Finishing. Manufacturing overhead is allocated based on direct labor cost in the Sanding Department
and direct labor hours in the Finishing Department. The following additional information is available:

Sanding Finishing
Estimated amounts Dept. Dept.
Direct labor cost $250,000 $500,000
Direct labor hours 32,000 50,000
Manufacturing overhead costs $400,000 $250,000

Actual data for completed Job No. 140 is as follows:

Sanding Finishing
Actual amounts Dept. Dept.
Direct materials requisitioned $90,000 $45,000
Direct labor cost $50,000 $40,000
Direct labor hours 7,000 5,000

a. Compute the predetermined manufacturing overhead rate for the Sanding Department.
b. Compute the predetermined manufacturing overhead rate for the Finishing Department.
c. What is the total manufacturing overhead cost for Job. No. 140?
d. If Job No. 140 consists of 500 units of product, what is the average unit cost of this job?
Answer:
Diff: 2
136) Stars and Stripes Corporation uses job costing. The following is selected financial data from the
company for the most recent year.

Ending raw materials inventory $18,500

Ending work in process inventory $57,300
Ending finished goods inventory $54,000
Amount of underallocated manufacturing overhead $3,200
Cost of goods sold for year $75,100
Cost of raw materials purchased during year $49,000
Cost of direct materials requisitioned during year $35,400
Cost of indirect materials requisitioned during year $5,800
Cost of goods completed during year $125,000
Manufacturing overhead allocated $80,000
MOH % of direct labor cost 125%
Compute:
a) Beginning raw materials inventory (BI + DM purchase + IDM purchase – DM use – IDM use = EI)
b) Beginning work in process inventory (BI+DL+DM+MOH-FINISHED=EI)
c) Beginning finished goods inventory (BI + MNGFT I – SOLD = EI)
d) Actual manufacturing overhead costs incurred during the year
Answer:
Part a
Ending raw materials inventory $18,500
Cost of direct materials requisitioned during year $35,400
Cost of indirect materials requisitioned during year $5,800
Cost of raw materials purchased during year $ (49,000)
Beginning raw materials inventory $10,700

Part b
Manufacturing overhead allocated $80,000
MOH % of direct labor cost ×125%
Direct labor cost $64,000

Ending work in process inventory $57,300

Cost of goods manufactured during year $125,000
Cost of direct materials requisitioned during year $ (35,400)
Manufacturing overhead allocated $ (80,000)
Direct labor cost $ (64,000)
Beginning work in process inventory $2,900

Part c
Ending finished goods inventory $54,000
Cost of goods sold for year $75,100
Cost of goods manufactured during year $ (125,000)
Beginning finished goods inventory $4,100

Part d
Manufacturing overhead allocated $80,000
Amount of underallocated manufacturing overhead $3,200
Actual manufacturing overhead $83,200
248) The following information was gathered for the Falsetto Corporation for the most recent year.
Manufacturing overhead is allocated using direct labor hours.

Estimated direct labor hours 75,000

Actual direct labor hours 82,000
Estimated manufacturing overhead costs $1,275,000
Actual manufacturing overhead costs $1,335,000

Compute:
a) Predetermined manufacturing overhead rate
b) Manufacturing overhead allocated for the year
c) Amount of over/underallocated overhead at the end of the year
Answer:
SOLUTION - Part a
Estimated manufacturing overhead costs divided by $ 1,275,000
Estimated direct labor hours 75,000
Predetermined manufacturing overhead rate per DL hour $ 17.00

SOLUTION - Part b
Estimated manufacturing overhead costs divided by $ 1,275,000
Estimated direct labor hours 75,000
Predetermined manufacturing overhead rate per DL hour $ 17.00

Actual direct labor hours 82,000

Predetermined manufacturing overhead rate per DL hour $ × 17.00
Allocated manufacturing overhead for the year $ 1,394,000

SOLUTION - Part c
Estimated manufacturing overhead costs divided by $ 1,275,000
Estimated direct labor hours 75,000
Predetermined manufacturing overhead rate per DL hour $ 17.00

Actual direct labor hours 82,000

Predetermined manufacturing overhead rate per DL hour $ × 17.00
Allocated manufacturing overhead for the year $ 1,394,000

Actual manufacturing overhead costs $ 1,335,000

Allocated manufacturing overhead for the year $ 1,394,000
Overallocated manufacturing overhead $ 59,000
312) At Plastastic, Inc., the beginning balance of the work in process inventory account in April of the
most recent year was $19,000. Direct materials used during April totaled $130,000. Total
manufacturing labor incurred in April was $180,000, 75% of this amount represented direct labor. The
predetermined manufacturing overhead rate is 130% of direct labor cost. Actual manufacturing
overhead costs for April amounted to $160,000.

In April, two jobs were completed with total costs of $110,000 and $95,000, respectively. In April, the
two jobs were sold on account for $187,000 and $124,000, respectively.
+19+130+135+175-110-95
a. Compute the balance in work in process inventory on April 30.
b. Record the journal entry for direct materials used in April.
c. Record the journal entry to record labor costs for April. WIP + MOH +WP
d. Record the journal entry for allocated manufacturing overhead for April. WIP +MOH
e. Record the entry to move the completed jobs into finished goods inventory in April. FGI + WIP
f. Record the entry to sell the two completed jobs on account in April. AR S , COGS + FGI
Answer:

Following part will not be asked in the exam!