ACCT230 Homework – Week 3, Chapter 4

Problem 1:

Nutt Industries electricity costs and machine hours over a six-month period follow:

Machine Electricity
Hours Cost
January 2,000 $4,800
February 2,500 5,200
March 3,000 5,400
April 2,400 5,000
May 2,800 5,600
June 2,200 5,000

Using the high-low method, what is the estimated electricity cost per machine hour?

600/1000=.60/m
.60 is the estimated electricity cost

Problem 2:

Nutt Industries electricity costs and machine hours over a six-month period follow:

Machine Electricity
Hours Cost
January 2,000 $4,800
February 2,500 5,200
March 3,000 5,400
April 2,400 5,000
May 2,800 5,600
June 2,200 5,000

Using the high-low method, what is the formula that can be used to estimate electricity costs
at different levels of volume?

Electricity = total cost –fixed cost / unit of volume

Problem 3:
Venus Company has developed the following flexible budget formula for annual indirect
labor cost:

Total annual cost = $12,000 + $.25 / unit

Operating budgets for the current month are based on 5,000 units. Indirect labor costs
included in this monthly planning budget are_____1252.40______________.

Total annual cost = $12,000 + $.25 / unit

12,000+.25 / 5000= 2.40

.25* 5000=1250

1250 +2.40=1252.40

Problem 4:

Manufacturing uses the direct labor cost method for applying factory overhead to
production. The budgeted direct labor cost and factory overhead for the previous fiscal
year were $1,000,000 and $800,000, respectively.

During the year, the company started and completed Job 352A, which had direct material
and labor costs of $32,000 and $45,000, respectively. What was the cost of Job 352A?

Direct Materials ……..32,000

Direct labor …………..45,000
Factory over head cost (50% of direct labor) …………..22,500
Total cost of completed job ………………99,500

99,500 is the cost of job 352 A

Problem 5:

The Mason Corporation budgeted overhead at $240,000 for the period for Department A
based on a budgeted volume of 60,000 direct labor hours. During the period, Mason started
and completed Job B25, which incurred 200 labor hours at a cost of $2,200, and $5,000 of
direct materials. What was the cost of Job B25?

Direct Materials ……….. 5000

Direct labor (200 hours)………………. 2,200
Factory over head (200 hours @ $ 4)…………. 800
Totals cost of completed job ………………………………………$ 8000
Problem 6:

The Owens Company uses the machine hour method of applying factory overhead to
production. The budgeted factory overhead last year was $200,000, and there were 40,000
machine hours budgeted. Job 84 was started and completed during the period. Direct
materials costing $900 were incurred. Twenty-five direct labor hours were worked at a
cost of $350, and 40 machine hours were incurred. What was the cost of Job 84?

Direct Materials …………900

Direct Labor………………….. 350
Factory overhead ( 40 hours @ $ 5) ………….200
Total cost of completed job ……………………………………..1450

1450 is the total cost of job 84

Problem 7:

Manufacturing uses the direct labor cost method for applying factory overhead to
production. The budgeted direct labor cost and factory overhead for the previous fiscal
year were $1,000,000 and $800,000, respectively. Actual direct labor cost and factory
overhead were $1,100,000 and $825,000, respectively.
What is the amount of under- or over applied factory overhead?

55,000 is the amount of factory over head that is over applied