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ACCT 225

Ch. 4 HW Check Figures/condensed solutions


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

Close over/under applied OH to COGS:


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

$
$

260.00 per DLH


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
Purchasing
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

Total cost per unit

$
$
$
$

150,000
1,185,000
39.50
189.50

Unit cost above (single rate)

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.

Total overhead budget:


Department 1 budgeted OH:
Department 2 budgeted OH:

1536000
384000
1152000

1,605,120 This is total applied MOH using departmental allocation rates.

$
$

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