Amount to be back flushed from RIP to Finished Good 97,000

Applied conversion cost 300,000

Amount of Finished Good 397,000

Raw Materials 300,000

Applied Conversion Cost 1,300,000

COGS Amount (unadjusted) 1,600,000

Actual Overhead 995,000

Applied Overhead (1,300,000 – 200,000) 1,100,000

Over applied Conversion Cost 105,000

The problem is
asking for the under
applied conversion
cost, but when
computed,
conversion cost is over applied. Hence, there is ZERO under applied conversion cost

Note: If applied Overhead is GREATER than actual overhead, overhead is OVER APPLIED.

If Applied Overhead is LESS THAN actual over head, overhead is UNDER APPLIED
Raw Materials 300,000

Applied Conversion Cost 1,300,000

COGS Amount (unadjusted) 1,600,000

Less: Over applied Conversion Cost 105,000

COGS Amount (Adjusted) 1,495,000

Raw Materials on Credit 246,000

Add; Beg. RIP Account (12,300 – 1,300) 11,000

TOTAL 257,000

Less: Ending RIP (12,100 – 2,100) 10,000

Amount to be back flushed from RIP to Cost of Goods Sold 247,000

Raw Materials on Credit 246,000

Add; Beg. RIP Account (12,300 – 1,300) 11,000

TOTAL 257,000

Less: Ending RIP (12,100 – 2,100) 10,000

Amount to be back flushed from RIP to Cost of Goods Sold 247,000

Less: Conversion Cost (1,300 – 2,100) (800)

COGS Amount (adjusted) 246,200

Total Cost / Purchasing Department Made = Cost Rate

300,000 / 150,000 = 2

100,000 / 10,000 = 10

73,500 / 7000 = 10.5

Cost Rate x Purchasing Department Activities = Purchasing department Cost

125 x 2 = 250

60 x10 = 600

15 x 10.5 = 157.5

1007.50 purchasing department cost

Purchasing Department Cost / Number of Units = Purchasing department cost per unit

1007.50 / 200 = 5.04 cost per unit

Raw Materials on Credit 367,000

Add: Beg. RIP Account (31,00 - 1400) 29,600

TOTAL 396,600

Less: Ending RIP (33,000 – 1,800) 31,200

Amount to be back flushed from RIP to Finished Good 365,400

JOB 101

Budgeted Cost x Number of Setups / Budgeted Activity Level

Budgeted Cost x Number of Inspection / Budgeted Activity Level

Budgeted Cost x Number of Material moves / Budgeted Activity Level

Budgeted Cost x Engineering hours / Budgeted Activity Level

20,000 x 1 / 200 = 100

130,000 x 20 / 6,500= 400

80,000 x 30 / 8000 = 300

50,000 x 10 / 1,000 = 500

 1,300

Direct Materials 12,000

Direct Labor 2000

Overhead

Number of Setups (20k x 2 /200) 200

Number of Inspections (130k x 10 / 6,500) 200

Number of material move (80k x 10 / 800) 100

Engineering Cost (50k x 50 / 1,000) 2,500

17,000

Total Cost / Units Completed = Cost of each unit

17,000 / 50 = 340
Direct Materials 8,000

Direct Labor 4,000

Overhead

Number of Setups (20k x 4 /200) 400

Number of Inspections (130k x 30 / 6,500) 600

Number of material move (80k x 50 / 800) 500

Engineering Cost (50k x 10/ 1,000) 500

14,000

Total Cost / Units Completed = Cost of each unit

14,000 / 200 = 70

Cost of Each Unit x 140% = Price of each Unit

70 x 1.40 = 98
Wall Mirrors (25 Units x 200 Hours per unit) 5,000 hours

Specialty Windows (25 Units x 200 Hours per unit) 5,000 hours

10,000 hours

Budgeted materials handling cost 500 / 10,000 hours = 0.05

Materials Handling cost 0.05 x 200 per unit = 10

500 / 20 Material Move = 25 per material

25 per material move x 5 material move = 125

125/ 25 wall mirror units produced = 5 material handling cost per wall mirror
Total Number of Setups 500

Total Number of Shipments 700

Total Number of Engineering changed orders 30

MODEL S

Overhead

Setups 45,000 / 500 x 100 = 9,000

Shipments 70,000 / 700 x 200 = 20,000

Engineering Change Orders 90,000 / 30 x 15 = 45,000

74,000

Total Costs / Unit Produced = Overhead cost per unit

74,000 / 2,000 = 37 cost per unit

MODEL M

Overhead

Setups 45,000 / 500 x 150 = 13,500

Shipments 70,000 / 700 x 225 = 22,500

Engineering Change Orders 90,000 / 30 x 10 = 30,000

66,000

Total Costs / Unit Produced = Overhead cost per unit

66,000 / 6,000 = 11 cost per unit

MODEL L

Overhead

Setups 45,000 / 500 x 250 = 22,500

Shipments 70,000 / 700 x 275 = 27,500

Engineering Change Orders 90,000 / 30 x 5 = 15,000

65,000

Total Costs / Unit Produced = Overhead cost per unit

65,000 / 12,000 = 5.42 cost per unit