Tutorial 2 – exercises

3.13 - Accounting for manufacturing overhead:

Budgeted manufacturing overhead 7.000.000

Budgeted machine-hours 200.000
Actual manufacturing overhead 6.800.000
Actual machine-hours 195.000

1. Budgeted manufactured overhead rate = 70000000 = 35

2000000
Creditors Manuf. Overhead
7000000 7000000 6800000

2. There is a 7000000-6800000 = 200.000 overallocation of indirect costs. The result is quite big.
The actual manufactured overhead rate = 34.8 < 35 . there is a 0.2 difference in the rates which is not to be ignored.

3.14 Budgeted manufactured overhead = 4 800 000

Overhead allocation base - Machine hours
Budgeted machine-hours = 80 000
Manufacturing overhead incurred 4 900 000
Actual machine hours 75 000

So we notice an under allocation of overhead and an overallocation of machine hours

The under allocation of overhead = 100 000
The overallocation of machine-hours = 5000

1. Budgeted overhead rate = 4 800 000 / 80 000 = 60

2. Cost of goods sold = 100 000
Manufacturing overhead allocated = 10 000 000
Manufacturing overhead control = 10 100 000
Proration Acc after pror.
3. WIP 4 000 750 000 0.0075 * 100000 = 7 500 757 500
Finished Goods 11 000 1 250 000 0.125 * 100000 = 12 500 1 262 500
Cogs 60 000 8 000 000 0.8 * 100000 = 80 0000 8 080 000
75 000 10 000 000

4. WIP 4 000 750 000 0.0053 * 100000 = 5300 755 300

Finished Goods 11 000 1 250 000 0.088 * 100000 = 8800 1 250 800
Cogs 60 000 8 000 000 0.8 * 100000 = 80 000 8 080 000
75 000 10 000 000
 Units for women Units for men women men Total
Revenues 1500 750 675 000 ` 450 000 1 125 000
COGS 300 000 187 500 487 500
Gross margin / profit 637500
Shipping costs 75 000 37 500 127500
Labour costs 125000
Operating profit 385000