PROBLEMS

Problem 1
The Denmark Company estimates its factory overhead for the
next period at 500, 000. It is estimated that 10, 000 units will be
produced at a materials cost of 400, 000 and will require 25, 000 direct
labor hours at an estimated cost of 250, 000. The machines will run
about 80, 000 hours.

Required: The predetermined factory overhead rate based on:

1. Material cost
2. Units of production
3. Machine hours
4. Direct labor cost
5. Direct labor hours

Answer:
1. 500 000/400 000 x 100 = 125% of direct materials cost

2. 500 000/10 000 = 50/unit

3. 500 000/80 000 = 6.25/machine hours

4. 500 000/250 000 x 100 = 2% of direct labor cost

5. 500 000/25 000= 20/direct labor hours

Problem 2
The Marco Company budgeted overhead at P 255, 000 for the
period for Department A, on the basis of a budgeted volume of P 100,
000 direct labor hours. At the end of the period, the Factory Overhead
Control account for Department A had a balance of P 270, 000; actual
direct labor hours were P 105, 000

Required:
1. Compute for the overhead application rate
2. Compute for the applied factory overhead
3. Compute for the over or under-applied overhead

Answer:

Problem 3
Marvin Companys estimated factory overhead for the year was P
456, 120 and the actual overhead was P 470, 800. Machine hours were
used in determining the factory overhead application rate. There were
P 84, 500 actual machines and P 81, 450 estimated machine hours
during the year.

Required:
A. Prepare journal entries to record the following
1. The applied factory overhead
2. The actual factory overhead
3. The closing of the applied overhead account and actual factory
account.
B. Assume the following amounts of applied factory overhead in each
account.
Cost of goods sold 350 000
Finished goods inventory-end 100 000
Work in process inventory-end 23 200
Allocate the over or under-applied factory overhead to these three
accounts.

Answer:

Problem 4
The Ellery Corporation uses the job order cost system of
accounting. Shown below is a list of the jobs completed during the
month of March showing the charges for materials requisitioned and for
direct labor cost.
Job Material Cost Direct Labor
123 300 600
124 1 080 940
125 720 1 400
126 4 200 5 120
Required:
Assuming that factory overhead is applied on the basis of direct labor
costs and that the predetermined rate is 180% compute:
1. The amount of overhead to be added to the cost of each job
completed
2. The total cost of each job completed during the month.