14 Exercise: El-Delta Mfg company uses Direct labor costs for computing the applied mfg OH costs. The following information are available for you about the cost period ended Oct. 31, 2016: (1) Wages of workers: L.E. 180,000 (2) Indirect materials used: L.E. 64,000 (3) Salaries of supervisors: L.E. 96,000 (4) Depreciation of factory machines: L.E. 70,000 (5) Factory insurance: L.E. 100,000 (6) Estimated mfg OH costs: L.E. 360,000 (7) Account balances of: -WIP __L.E. 200,000 -COGM L.E. 500,000 -COGS L.E. 1,300,000 (1) Compute and interpret predetermined overhead rate. (2) Determine overapplied overhead or underapplied overhead, where this variance is considered “important”. (3) Journalize the previous transactions. (4) Determine the ending balances of goods accounts after treatment overapplied overhead or underapplied overhead.15 Solution (1) Estimated mfg.OH Costs P-OH—R =F otimated Direct labor Cost _ LE 360,000 = LE 180,000 = L.E 2 /pound of DL cost This rate is > financial rate and means that: ach pound of DL costs, will cause L.E. 2 mfg OH costs Applied mfg. OH cost = P-OH-R x Actual DL cost = 2 x 180,000 = LE. 360,000 (2) Comparing between Applied & actual mfg OH costs: Applied mfg OH costs 360,000 Actual mfg OH costs: Indirect materials 64,000 Indirect labor 96,000 Depreciation of factory machines 70,000 Factory insurance 100,000 330,000 = Overapplied overhead 30,00016 (3) General journal entries: WIP 360,000 Applied mfg OH costs 360,000 Actual mfg. OH costs 330,000 Raw material control (indirect Material) 64,000 Factory payroll clearing (Indirect Labor) 96,000 Machine depreciation 70,000 Factory insurance 100,000 Applied mfg. OH costs | 30,000 WIP 30,000 x (200,000 / 2,000,000) 3,000 COGM 30,000 x (500,000 / 2,000,000) 7,500 COGS 30,000 x (1,300,000 / 2,000,000) 19,500 (4) The ending balances of goods accounts: WIP = 200,000 -3000 = 197,000 COGM = 500,000 -7500 = 492,500 COGS = 1,300,000 —19500 = 1,280,50017 Exercise “Assignment” n for the assembly dept. of El-Nasr Co. for the month of Dec. 2016 is given below: (1) Units of production 155000 units. (2) DM costs L.E. 436170. (3) DL costs L.E. 525760. (4) DL hours 119000 hours. (5) Machine hours 77260 hours. (6) Mfg OH costs aggregated in the production dept. are: Indirect materials L.E. 142400, Indirect labor L.E. 117500, and other indirect costs L.E. 112700. Required Firstly: Determine & interpret the mfg overhead applic: following bases: (1) Units of production basis (2) DM costs basis (3) DL costs basis (4) DL hours basis (5) Machine hours basis. ‘ion rates under each of the Secondly: If the company has received a special job order No. 777 from its customer to produced 1200 units at Jan. 2017. You are required to predetermine the total cost of this order in the light of following data: L.E. 24000 (1) DM required for job order No. 777 is (2) DL hours required for job order No. 777 are 780 hours & the rate of hour is L.E. 20 (3) Machine hours required to manufacture the job order No. 777 are 200 hours.18 Solution Total Mfg. OH: Indirect materials 142,400 Indirect labor 117,500 Other Indirect Cost 112,700 = Total Mfg. OH 372,600 (1) Units of production basis: Estimated mfg.OH Costs LE 372,600 That is mean: each unit produced will cause L.E. 2.4 mfg OH costs. This rate is > Non-financial rate (2) DM_costs ba: Estimated mfg.OH Costs L.E 372,600 P-OH-R =~ oimated DM Costs ~ LE. 436,170 ~ bre 0-85 / Pound of DM That is mean: each pound of DM costs, will cause L.E. 0.85 mfg OH costs This rate is > Financial rate19 (3) DL Costs _basis: Estimated mfg.OH Costs LE 372,600 P-OH-—R = Domated mig OH Costs _ LE 372,600 = L.E 0.7 / Pound of DL Estimated DL Costs ~ LE 525,760 Lead That is mean: each pound of DL costs, will cause L.E. 0.71 mfg OH costs This rate is > Financial rate (4) DL_hours basis Estimated mfg.0H Costs LE 372,600 PCOH-R = “Tstimated DL hours ~ 119,000 hours — eee That is mean: each DL hour will cause L.E. 3.12 mfg OH costs. This rate is > Non-financial rate (5) Machine hours basis Estimated mfg.OH Costs LE 372,600 P-OH-=R = OS = = LE 4.8 / Machine hrs Estimated Machine hours 77,260 hours That is mean: each machine hour will cause L.E. 4.8 mfg OH costs.Second: (1) Units of production basis: Total Cost of the Job Order No.777: DM costs DL Costs (780 hrs x L.E. 20) Applied Mfg.OH (1,200 units x L.E 2.4) (2) DM_costs basis: Total Cost of the Job Order No.777: DM costs DL Costs (780 hrs x L.E. 20) Applied Mfg.OH —(L.E 24,000 x L.E 0.85) (3) DL _Costs_basis: Total Cost of the Job Order No.777: DM costs DL Costs (780 hrs x L.E. 20) Applied Mfg.OH (LE 15,600 x L.E 0.7) 24,000 15,600 2,880 42,480 24,000 15,600 20,400 60,000 24,000 15,600 10,920 50,520 2021 (4) DL_hours basis Total Cost of the Job Order No.777: DM costs 24,000 DL Costs (780 hrs x L.E. 20) 15,600 Applied Mfg.OH (780 hrs x L.E 3 ) 2,340 41,940 (5) Machine hours basis Total Cost of the Job Order No.777: DM costs 24,000 DL Costs (780 hrs x L.E. 20) 15,600 Applied Mfg.OH (200 hrs x L.E 4.8 ) 960 40,560