Question

Question 2.2

Paddle Place manufactures paddles and tables. In December, the two production departments had

budgeted allocation bases of 3,100 machine-hours in Paddle and 6,900 direct manufacturing labor-

hours in Table. The budgeted manufacturing overheads for the month were $51,200 and $56,900,

respectively. For Project X, the actual costs incurred in the two departments were as follows:

Paddle

Table

Direct materials purchased on account

$80,000

$177,500

Direct materials used

21,200

12,200

Direct manufacturing labor

Indirect manufacturing labor

Indirect materials used

Lease on equipment

Utilities

41,900

53,500

8,900

9,000

5,100

4,750
14,100

3,750

990

1,250

Project X incurred 900 machine-hours in Paddle and 200 manufacturing labor-hours in Table. The

company uses a budgeted overhead rate for applying overhead to production.

Submission Instructions:

1. Determine the budgeted manufacturing overhead rate for each department.

2. Prepare the journal entries for Paddle department.

3. What is the total cost of Project X?

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Transcribed Image Text:Question 2.2 Paddle Place manufactures paddles and tables. In December, the
two production departments had budgeted allocation bases of 3,100 machine-hours in Paddle and 6,900
direct manufacturing labor- hours in Table. The budgeted manufacturing overheads for the month were
$51,200 and $56,900, respectively. For Project X, the actual costs incurred in the two departments were
as follows: Paddle Table Direct materials purchased on account $80,000 $177,500 Direct materials used
21,200 12,200 Direct manufacturing labor Indirect manufacturing labor Indirect materials used Lease on
equipment Utilities 41,900 53,500 8,900 9,000 5,100 4,750 14,100 3,750 990 1,250 Project X incurred
900 machine-hours in Paddle and 200 manufacturing labor-hours in Table. The company uses a budgeted
overhead rate for applying overhead to production. Submission Instructions: 1. Determine the budgeted
manufacturing overhead rate for each department. 2. Prepare the journal entries for Paddle
department. 3. What is the total cost of Project X?

Step 1

Manufacturing overhead is an accounting term that refers to all indirect costs incurred during a product's
manufacture. If your company creates a product in a warehouse or product, for example, the power in
that structure is a manufacturing overhead expense. Both applied and planned product costs are indirect
production expenses, although they are incurred in different ways.
Step 2

Answer 1.

Budgeted Manufacturing Overhead Rate

Paddle Dept Table Dept

Budgeted Manufacturing Overhead (A) $51,200 $56,900

Allocation Base (B) 3,100 Machine Hours 6,900 Direct labor hours

Budgeted Manufacturing Overhead Rate (A / B) $16.52 Per Machine Hour $8.25 per direct labor
hour

Step 3

Answer 2.

Transaction General Journal Debit Credit

1. Direct Materials$80,000

Accounts Payable $80,000

(Being materials purchased on account)

2. Work in Process Inventory $21,200

Direct Materials $21,200

 (Being materials used in production)

3. Work In Process Inventory (Direct labor) $41,900

Wages Payable $41,900

(Being direct manufacturing labor recorded)

4. Manufacturing Overhead (indirect labor) $8,900

Wages Payable $8,900

(Being indirect manufacturing labor recorded)

5. Manufacturing Overhead (indirect materials) $5,100

Direct materials $5,100

(Being indirect manufacturing materials recorded)

6 Manufacturing Overhead (Lease on equipment) $14,100

Rent on Equipment $14,100

(Being lease on equipment is recorded)

7. Manufacturing Overhead (Utilities) $990

Utilities $990

(being utilities recorded)

a
Step 4

Answer 3.

Total Cost of Project X

Paddle Dept Table Dept Total Cost

Direct materials used $21,200 $12,200 $33,400

Direct manufacturing labor $41,900 $53,500 $95,400

Applied Manufacturing Overhead $0

Paddle Dept. (900 Machine Hours x $16.52) $14,868 $14,868

Table Dept. (200 labor hours x $8.25 $1,650 $1,650

Total Manufacturing Cost $77,968 $67,350 $145,318