Cost rather that Product Cost. This type of cost is unrelated to manufacturing overhead and cost of goods sold. | Manufacturing Overhead:Manufacturing overhead includes all costs of manufacturing such as indirect material‚ indirect labor‚ property taxes‚ maintenance and repairs‚ insurance etc. It excludes the direct material and direct labor. The selling and administrative expenses will not be reported in the manufacturing overhead since they are not incurred for the production of the goods. |
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CHAPTER 3 PROBLEM 3-43 (35 MINUTES) 1. Predetermined overhead rate = budgeted overhead ÷ budgeted direct-labor cost = $2‚730‚000 ÷ $2‚100‚000 = 130% of direct labor cost 2. Additions (debits) total $7‚802‚500 [$2‚800‚000 + $2‚175‚000 + ($2‚175‚000 x 130%)]. 3. The finished-goods inventory consisted of job no. 3154‚ which cost $175‚750 [$78‚000 + $42‚500 + ($42‚500 x 130%)]. 4. Since there is no work in process at year-end‚ all amounts in the Work-in-Process account must
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North Sea oil fields. (The Norwegian currency is the krone‚ which is denoted by Nkr.) The company uses a sob-order costing system arid applies manufacturing overhead cost to jobs on the basis of direct labor-hours. At the beginning of the year‚ the following estimates were made for the purpose of computing the predetermined overhead rate: manufacturing overhead cost‚ Nkr360‚000; and direct labor-hours‚ 900. The following transactions took place during the year (all purchases and services were
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EXERCISE2-2 Classifying Manufacturing Costs THE PC WORKS ASSEMBLES CUSTOM COMPUTERS FROM COMPONENTS SUPPLIED BY VARIOUS MANUFACTURERS. THE COMPANY IS VERY SMALL AND ITS ASSEMBLY SHOP AND RETAIL SALES STORE ARE HOUSED IN A SINGLE FACILITY IN A REDMOND‚ WASHINGTON‚ INDUSTRIAL PARK. LISTED BELOW ARE SOME OF THE COSTS THAT ARE INCURRED AT THE COMPANY. For each cost‚ indicate whether it would most likely be classified as direct labor‚ direct materials‚ manufacturing
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February‚ purchases of parts (replacement parts) by Star amounted to $97‚000‚ the beginning inventory of parts was $38‚500‚ and the ending inventory of parts was $15‚250. Payments to repair technicians during the month of February totaled $52‚500. Overhead incurred was $121‚000. a. What was the cost of materials used for repair work during the month of February? $120‚250. b. What was the prime cost for February? $173‚020. c. What was the conversion cost for February? $173‚500. d. What was the total
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wages of refinery security guards employed by ExxonMobil Corporation. Product cost‚ Variable‚ Manufacturing Overhead 5. The salary of a financial vice president of Hewlett Packard. Period Cost‚ Fixed 6. Advertising costs of Coca-Cola. Period Cost‚ Fixed 7. Straight-line depreciation on factory machinery of Boeing Corporation. Prodcut Cost‚ Fixed‚ Manufacturing Overhead 8. Wages of assembly-line personnel of Whirlpool Corporation. Product Cost‚ Variable
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what conditions is direct labor a valid basis for allocating overhead? Direct labor is a valid basis for allocating overhead when: (a) direct labor constitutes a significant part of total product cost‚ and (b) there is a high correlation between direct labor and changes in the amount of overhead costs. 2. What has happened in recent industrial history to reduce the usefulness of direct labor as the library basis for allocating overhead to products? Recently in the industries‚ the amount of direct
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year. If overhead is applied on the basis of direct labor hours‚ what will be the overhead rate per hour? 2. Energetica Company’s predetermined overhead rate is based on direct labor hours. At the beginning of the current year‚ the company estimated that its manufacturing overhead would total $440‚000 during the year. During the year‚ the company incurred $400‚000 in actual manufacturing overhead costs. The Manufacturing Overhead account showed that overhead was underapplied
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Assigning Overhead Costs – Overhead costs are not directly related to production volume‚ and therefore cannot be traced to units of product in the same way as direct materials and direct labor. Consequently‚ we must assign overhead costs using an allocation system. There are three methods of overhead allocation 1. The single plant wide overhead rate method (as discussed in Chapter 2) Single overhead rate = Total budgeted overhead for the plant / Total budgeted base With base being
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E19-3 Bacala Corporation (a) Identify each of the costs as direct materials‚ direct labor‚ manufacturing overhead‚ or period costs. Materials used in product $100‚000 – Direct materials Advertising expense $45‚000 – Period costs Depreciation on plant $60‚000 – Manufacturing overhead Property taxes on plant $14‚000 – Manufacturing overhead Property taxes on store $7‚500 – Manufacturing overhead Delivery expense $21‚000 – Period costs Labor costs of assembly-line workers $110‚000 – Direct labor Sales
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