1.

Plant Wide Rate

Overhead Application Plant Wide Rate
Budgeted Overhead $ 960,000
Expected Activity $ 480,000
Predetermined Overhead Rate $ 2.00

Product A Product B
Overhead Cost
Department A $ 600,000 $ 184,000
Department B $ 120,000 $ 48,000
Total Manufacturing Cost $ 720,000 $ 232,000

2. Departmental Rates
Overhead Application Departmental Rates
Department 1 Department 2
Overhead $ 240,000 $ 720,000
Total $ 960,000
Direct Labor Hours
Product A 300,000 60,000
Product B 92,000 24,000
Total DL Hours 392,000 84,000
Total $ 476,000
Machine Hours
Product A 24,000 20,000
Product B 28,000 100,000
Total Machine Hours 52,000 120,000
Total $ 172,000
Overhead Rate $ 0.61 $ 6.00
per DL Hours per M Hours

Product A Product B
Overhead Cost
Department 1 $ 183,673 $ 56,327
Department 2 $ 120,000 $ 600,000
Total Overhead Cost $ 303,673 $ 656,327

Department 1 Department 2
3. Overhead Actual For This Year $ 250,000 $ 770,000
Budgeted Overhead For This Year $ 240,000 $ 720,000
Underapplied Overhead Cost $ 10,000 $ 50,000
Total
$ 1,020,000
$ 960,000
$ 60,000

Journal Entry Underapplied Overhead Cost

Department
COGS $ 60,000
Manufactured Overhead Control $ 60,000
The additional information that I need to make the material journal entry are
presentation of wip account,COGS Account, and Finished Good Accounts.
1. Predetermined overhead rate $ 30
Standard Deluxe
Prime Cost $ 3,000,000 $ 3,500,000
Actual Activity (in direct labors) 50,000 50,000
Predetermined overhead rate $ 30 $ 30
Overhead Applied to production $ 1,500,000 $ 1,500,000
Total Cost $ 4,500,000 $ 5,000,000
Expected Unit 20,000 10,000
Cost per unit $ 225 $ 500
2. Computation of activity rate for each activity
Estimated Total Expected Use
Activity
Overhead Cost of cost driver
Maintenance $ 400,000 20,000
Engineering Support $ 600,000 30,000
Materials Handling $ 800,000 40,000
Setups $ 500,000 400
Purchasing $ 300,000 1,500
Receiving $ 200,000 5,000
Paying Suppliers $ 200,000 5,000
Activity Rates
hours used $ 20
hours $ 20
number of moves $ 20
number of setups $ 1,250
number of requisitions $ 200
orders processed $ 40
invoices processed $ 40

Allocation of overhead and computation of overhead cost per unit

Standard Model
Activity
Expected use driver Overhead rates
Maintenance 4,000 $ 20
Engineering Support 9,000 $ 20
Materials Handling 10,000 $ 20
Setups 40 $ 1,250
Purchasing 500 $ 200
Receiving 2,000 $ 40
Paying Suppliers 2,500 $ 40
Total Cost
Expected Units
Cost Per Unit Deluxe Model
Cost Assigned Expected use driver
$ 80,000 16,000
$ 180,000 21,000
$ 200,000 30,000
$ 50,000 360
$ 100,000 1,000
$ 80,000 3,000
$ 100,000 2,500
 $ 790,000
20,000
$ 39.50

Computation of unit cost of each product - Activity Based Costing

Particulars Standard Model Deluxe Model
Prime Cost $ 3,000,000 $ 3,500,000
Manufacturing Overhead $ 790,000 $ 2,210,000
Total Cost $ 3,790,000 $ 5,710,000
Expected Units 20,000 10,000
Units Product Cost $ 189.50 $ 571.00
Activity based costing is more accurate because the allocated overhead cost based on the
activity that used by the product
Model Deluxe Model
Expected use driver Overhead rates Cost Assigned
16,000 20 $ 320,000
21,000 20 $ 420,000
30,000 20 $ 600,000
360 1250 $ 450,000
1,000 200 $ 200,000
3,000 40 $ 120,000
2,500 40 $ 100,000
$ 2,210,000
10,000
$ 221.00
1. Plantwides Overhead Rate $ 1.50

Plant - Wide Rate Scientific Business

Overhead Cost $ 60,000 $ 600,000
Units Produced 30,000 300,000
Cost per unit 2.00 2.00

2a. Departmental Rates Department 1 Department 2

Overhead $ 340,000 $ 320,000
Direct Labor Hours
Scientific 30,000 10,000
Business 45,000 355,000
Total DL Hours 75,000 365,000
Machine Hours
Scientific 10,000 10,000
Business 160,000 40,000
Total Machine Hours 170,000 50,000
Overhead Rate $ 2.00 $ 0.88
Scientific Business
Overhead Cost
Department 1 $ 20,000 $ 320,000
Department 2 $ 8,767 $ 311,233
Total Overhead Cost $ 28,767 $ 631,233
Units Produced 30,000 300,000
Overhead Cost Per Unit $ 0.96 $ 2.10

2b. Departmental Rates Department 1 Department 2

Overhead $ 340,000 $ 320,000
Direct Labor Hours
Scientific 30,000 10,000
Business 45,000 355,000
Total DL Hours 75,000 365,000
Machine Hours
Scientific 10,000 10,000
Business 160,000 40,000
Total Machine Hours 170,000 50,000
Overhead Rate $ 4.53 $ 6.40

Scientific Business
Overhead Cost
Department 1 $ 136,000 $ 204,000
Department 2 $ 64,000 $ 256,000
Total Overhead Cost $ 200,000 $ 460,000
Units Produced 30,000 300,000
Overhead Cost Per Unit $ 6.67 $ 1.53
3. Computation of activity rate for each activity
Estimated Total Expected
Activity
Overhead Cost Use of Cost Driver
Setup $ 180,000 100
Inspection $ 140,000 2,000
Power $ 160,000 220,000
Maintenance $ 180,000 4,500

Allocation of overhead and computation of overhead co

Scientific
Activity
Expected use driver Overhead rates
Setup 40 $ 1,800
Inspection 800 $ 70
Power 20,000 $ 0.73
Maintenance 900 $ 40
Total Cost
Expected Units
Cost Per Unit

4. I think departmental rates using machine hours for department 1 and direct labor hours for department 2 is mor
accurate than departmental rates using direct labor hours for department 1 and machine hours for department 2
because the most activity that used by department 1 and department 2 are direct labor hours and machine hours.
 Activity
Rates
$ 1,800
$ 70
$ 0.73
$ 40

mputation of overhead cost per unit

tific Business
Cost Assigned Expected use driver Overhead rates Cost Assigned
$ 72,000 60 $ 1,800 $ 108,000
$ 56,000 1,200 $ 70 $ 84,000
$ 14,545 200,000 $ 0.73 $ 145,455
$ 36,000 3,600 $ 40 $ 144,000
$ 178,545 $ 481,455
30,000 300,000
$ 5.95 $ 1.60

for department 2 is more

ours for department 2
rs and machine hours.
1. Computation of activity rate for each activity
Estimated
Activity
Overhead Cost
Providing ATM service $ 100,000
Computer processing $ 1,000,000
Issuing statements $ 800,000
Customer inquiries $ 360,000

2. Calculate the cost of each product

Checking Accounts
Activity
Expected use driver
Providing ATM service 180,000
Computer processing 2,000,000
Issuing statements 350,000
Customer inquiries 350,000
Total Overhead Cost
Expected Units
Cost Per Unit

3.
Account Category
Earn Interest 2%
< $500 $ -
$500 to $1,000 $ 15
$1,001 to $2,767 $ 40
> $2,767 $ 100

I will recommendation Piedmont First National Bank to increase the service charge, interest received by customers,
that received by bank from checking account deposits customer to increase the profitability of checking account dep
Total Expected Activity
Use of Cost Driver Rates
 200,000 $ 0.50
2,500,000 $ 0.40
500,000 $ 1.60
600,000 $ 0.60

Checking Accounts Personal Loans

Overhead rates Cost Assigned Expected use driver Overhead rates
$ 0.50 $ 90,000 - $ 0.50
$ 0.40 $ 800,000 200,000 $ 0.40
$ 1.60 $ 560,000 50,000 $ 1.60
$ 0.60 $ 210,000 90,000 $ 0.60
$ 1,660,000
30,000
$ 55.33

Checking Account CAD Less Bank earns 4%

Service Charge
Deposits Service Charge On CAD
$ 400 5 $ 395 $ 16
$ 765 5 $ 760 $ 30
$ 2,040 0 $ 2,040 $ 82
$ 5,100 0 $ 5,100 $ 204

vice charge, interest received by customers, and interest

ase the profitability of checking account deposits.
al Loans Gold Visa
Cost Assigned Expected use driver Overhead rates Cost Assigned
$ - 20,000 $ 0.50 $ 10,000
$ 80,000 300,000 $ 0.40 $ 120,000
$ 80,000 100,000 $ 1.60 $ 160,000
$ 54,000 160,000 $ 0.60 $ 96,000
$ 214,000 $ 386,000
5,000 10,000
$ 42.80 $ 38.60

Overhead Cost Per Unit

Total CAD Revenue Gain or Loss
Checking Account
$ 21 $ 55.33 $ -34.53
$ 35 $ 55.33 $ -19.93
$ 82 $ 55.33 $ 26.27
$ 204 $ 55.33 $ 148.67