Managerial Accounting 1 Chapter 4

In: Business and Management

Submitted By lonilonni
Words 938
Pages 4
Problem 5-37 (1)

Machine setups 5 setups x $2,000 = $10,000
Raw materials 10,000 pounds x $2.00 = 20,000
Hazardous materials 2,000 pounds x $5.00= 10,000
Inspections 10 inspections x $75.00= 750
Machine hours 500 machine hours x $10= 5,000
Total $45,750

(2) Overhead cost per box $45,750/1,000 = $45.75

(3) Single predetermined rate $625,000/20,000 = $31.25

(4a) Raw material 10,000 pounds x $2 = $20,000 Machine hours 500 machine hours x $10 = 5,000 Budgeted overhead 500 machine hours x $31.25 = 15,625 $40,625

(b) Per box of chemicals $40,625/1,000 = $40.63

(5) These two product costing systems result in such widely differing costs because of the inaccuracy of the traditional single volume based overhead rate. The use of machine hours in the pre-determined rate does not reflect the usage of other activities during production. I would recommend the activity based costing system because of the accuracy of costs for each product, and it results in much better control over overhead costs.

(6)

Problem 5-38 (1)

Machine setups 3 setups x $2,000 = $6,000
Raw material 900 pounds = 1,800
Hazardous material 300 pounds = 1,500
Inspections 3 inspections = 225
Machine hours 50 machine hours = 500
Total $10,025

$10,025/100 = $100.25 + $120 +$40 = $260.25

(2)

Problem 5-35 (1)

Type A predetermined overhead rate:
Direct material cost (8,000 x $35) = $280,000
Direct labor cost (8,000x $20) = 160,000
Manufacturing overhead (16,000 x $800) = 1,280,000 $1,720,000
Total cost per unit ($1,720,000/8,000) = $215

Type B predetermined overhead rate:
Direct material cost (15,000 x $60) = $900,000
Direct labor cost (15,000 x $120) = 300,000
Manufacturing overhead (22,500 x $80)…...

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