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# ACCT 225

Exercise 4.12:
Plantwide rate =
\$
15.20 per MH
Applied OH =
\$
5,814,000
Actual OH =
OVERapplied OH =

\$
\$

## Don't use planned MH again, apply

Don't use budgeted MOH again, co

5,730,000
84,000

MOH Control
\$
COGS

84,000

## Over applied, so need to reduce am

\$

84,000

actual

To close:
Balance:
To prorate over/under applied MOH: need proportionate amounts of WIP, FG, & COGS:
WIP
\$
576,000
0.192 x 84,000
FG
\$
624,000
0.208 x 84,000
COGS
Total

\$
\$

1,800,000
3,000,000

Exercise 4.15
Plantwide OH rate:
Applied to products
DM
DL
MOH
Cost per unit
MOH per unit
ABC costing: rates:
setups
ordering
machining
receiving
Applied to products

0.6 x 84,000
1

\$
\$

Model A
600,000 \$
480,000

\$
\$
\$
\$

1,560,000
2,640,000
165.00
97.50

\$
\$
\$
\$

800.00
20.00
20.00
40.00
Model A

\$
\$
\$
\$

per
per
per
per

Model B
800,000
###
520,000
1,800,000
225.00
65.00

setup
order
MH
receiving hr.
Model B

DM
DL
MOH: setups
MOH: ordering
MOH: machining

\$
\$
\$
\$
\$

600,000
480,000
320,000
120,000
480,000

\$
\$
\$
\$
\$

800,000
480,000
160,000
240,000
360,000

MOH: receiving

\$
\$
\$
\$

120,000
2,120,000
132.50
65.00

\$
\$
\$
\$

280,000
2,320,000
290.00
130.00

2.00

## Cost per unit

MOH per unit

Problem 4.28
Plantwide rate based on DLH:

## Allocation: based on rate X actual hrs:

Product 1
Product 2
\$
1,152,000 \$
371,200
Departmental Rates: Department 1 will use DLH, Department 2 will use MH:
Dept. 1
Dept. 2
\$
0.60 \$
6.00
per DLH
per MH
Allocation to products:
Product 1
Product 2
From Dept. 1: (DLH used)
\$
288,000 \$
88,320
From Dept. 2: (MH used)

\$
\$

148,800 \$
436,800 \$

1,080,000
1,168,320

Journal Entry:
COGS
MOH Control

Problem 4.29
Plantwide rate based on DLH:
Costs for each product using single rate:
DM + DL
MOH: 75,000 DLH each
Total Unit Cost

30.00

Standard
150.00

\$
\$

75.00
225.00

Break down total MOH into 7 cost pools with 7 cost drivers for 7 rates for applying MOH:

Maintenance
Engineering
Materials Handling
Setups
Receiving
Paying Suppliers

\$
\$
\$
\$
\$
\$
\$

## Costs for each product using ABC:

DM + DL (per unit)
MOH: 7 pools:
Maint.
Eng.
Mat. Hand.
Setup
Purch.
Rec.

\$
\$
\$
\$
\$
\$
\$

Pay.
Total MOH costs
MOH per unit

20
20
20
1,250
200
40
40

Standard
150.00
120,000
270,000
300,000
75,000
150,000
120,000

\$
\$
\$
\$

150,000
1,185,000
39.50
189.50

225.00

## on't use planned MH again, apply based on actual MH

on't use budgeted MOH again, compare applied to actual MOH spent

## Over applied, so need to reduce amount put into COGS.

T-account for MOH:
MOH Control
\$
5,730,000 \$ 5,814,000 applied
\$
\$

## WIP, FG, & COGS:

\$
16,128
\$
17,472
\$
\$

84,000 Bal.

84,000
0

ENTRY:

MOH Control
WIP

50,400
84,000

FG
COGS

Consumption Ratios:

Driver
DLH: overall rate

\$ 84,000
\$ 16,128
\$ 17,472
\$ 50,400

Model A Model B
0.75
0.25

Setups

0.666667 0.333333

Ordering
Machining
Receiving

0.333333 0.666667
0.571429 0.428571
0.3
0.7

The point: the plantwide rate, using DLH, assigns overhead in a ratio of 75% to A an
Using the four cost pools, you can see that none of them are very close to that ratio
quite a bit of consumption diversity (ranging from .67 to .3 for Model A and ranging
for Model B). I put the percentage of total MOH for each pool to show that the majo
(over 60%) are consumed by model A in greater proportion to B, but that a little ov
disproportionately by Model B.
Even so, assigning 75% of all overhead costs to Model A significantly overcosts A an
It would be even more overcosted if a larger percentage of the overhead costs were

proportion by model B.

Department 1 budgeted OH:
Department 2 budgeted OH:

1536000
384000
1152000

\$
\$

## 1,632,000 This is actual MOH incurred (given)

26,880 This is the amount UNDERapplied

\$
MOH Control

\$
\$
\$

26,880
\$

Deluxe
350.00
150.00
500.00

## s for applying MOH:

26,880

maintenance hrs.
engineering hrs.
number of moves
number of setups
number of requisitions
number of orders
number of invoices

\$
\$
\$
\$
\$
\$
\$
\$
\$
\$
\$

Deluxe
350.00
480,000
630,000
900,000
675,000
300,000
180,000
150,000
3,315,000
221.00
571.00
The difference in unit cost might be considered fairly significant.

500.00

\$
\$

Cost
2,080,000
480,000

23%

\$
360,000
17%
\$
840,000
40%
\$
400,000
19%
\$
2,080,000
d in a ratio of 75% to A and 25% to B.
e very close to that ratio. There is
for Model A and ranging from .7 to .33
ool to show that the majority of costs
to B, but that a little over 1/3 are consumed

## nificantly overcosts A and undercosts B.

the overhead costs were consumed in greater