When manufacturing overhead is applied to production which of the following accounts is credited quizlet?

Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:

Maher, Inc., applies manufacturing overhead at the rate of $60 per machine hour. Budgeted machine hours for the current period were anticipated to be 80,000; however, a lengthy strike resulted in actual machine hours being worked of only 65,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:

The selected data that follow relate to the Berger Furniture Company.

Direct material purchased $160,000
Direct material used 79,000
Direct labor 170,000
Manufacturing overhead incurred 100,000
Manufacturing overhead applied 90,000

During the year, products costing $310,000 were completed, and products costing $316,000 were sold for $455,000.

Raw-Material Inventory 160,000
Accounts Payable 160,000

Work-in-Process Inventory 79,000
Raw-Material Inventory 79,000

Work-in-Process Inventory 170,000
Wages Payable 170,000

Manufacturing Overhead 100,000
Miscellaneous Accounts 100,000

Work-in-Process Inventory 90,000
Manufacturing Overhead 90,000

Finished-Goods Inventory 310,000
Work-in-Process Inventory 310,000

Cost of Goods Sold 316,000
Finished-Goods Inventory 316,000

Accounts Receivable 455,000
Sales Revenue 455,000

A. Predetermined overhead rate: $720,000 ÷ 20,000 hours = $36 per machine hour

B. 1. Work-in-Process Inventory 55,000*
Raw-Material Inventory 55,000

Work-in-Process Inventory 105,000**
Wages Payable 105,000
* $18,000 + $37,000 = $55,000
**$45,000 + $25,000 + $35,000 = $105,000

2. Manufacturing Overhead 182,700
Accumulated Depreciation 20,000
Wages Payable 50,000
Manufacturing Supplies Inventory 4,000
Miscellaneous Accounts 108,700

3. Work-in-Process Inventory 97,200*
Manufacturing Overhead 97,200
*(900 + 600 + 1,200) x $36 = $97,200

4. Finished-Goods Inventory 276,500*
Work-in-Process Inventory 276,500
*No. 59: $95,000 + $18,000 + $45,000 +
(900 x $36) = $190,400
No. 60: $39,500 + $25,000 + (600 x $36) = $86,100

5. Cash 215,000*
Sales Revenue 215,000
*$190,400 + $24,600 = $215,000

Cost of Goods Sold 190,400
Finished-Goods Inventory 190,400

63. Brickman Corporation, which began operations on January 1 of the current year, reported the following information:

Estimated manufacturing overhead $ 600,000
Actual manufacturing overhead 639,000
Estimated direct labor cost 480,000
Actual direct labor cost 500,000
Total debits in the Work-in-Process account 1,880,000
Total credits in the Finished-Goods account 920,000

Brickman applies manufacturing overhead to jobs on the basis of direct labor cost and adds a 60% markup to the cost of completed production when finished goods are sold. On December 31, job no. 18 was the only job that remained in production. That job had direct-material and direct-labor charges of $16,500 and $36,000, respectively.

A. Predetermined overhead rate: $600,000 ÷ $480,000 = 125% of direct labor cost

B. Actual manufacturing overhead ($639,000) - applied overhead ($500,000 x 125% = $625,000) = $14,000 underapplied

C. Total debits to Work-in-Process ($1,880,000) - direct labor ($500,000) - applied overhead ($625,000) = direct materials used ($755,000)

D. The only job in production is job no. 18, which has direct material of $16,500 and direct labor of $36,000. Applied overhead amounts to $45,000 ($36,000 x 125%), yielding a total job cost of $97,500 ($16,500 + $36,000 + $45,000).

E. The company's cost of goods sold equals $920,000, resulting in sales revenues of $1,472,000 ($920,000 x 160%). Thus:

Accounts Receivable 1,472,000
Sales Revenue 1,472,000

Cost of Goods Sold 920,000
Finished-Goods Inventory 920,000

Montgomery, Inc., which uses a job-costing system, is a labor-intensive firm, with many skilled craftspeople on the payroll. Job no. 789 was the only job in process on January 1, having costs of $22,500 as of that date. Direct materials used and direct labor incurred during January were:

Job No. Direct Materials Direct Labor
789 $ 2,000 $ 6,000
790 9,000 10,000
791 14,000 8,000

Job no. 791 was the only job in production as of January 31.

The company should use direct labor because it is a labor-intensive firm, with many skilled craftspeople on the payroll. More than likely, a majority of overhead is "driven" by people rather than machine operation.

$300,000 $200,000 = 150% of direct labor cost

Direct material $14,000
Direct labor 8,000
Manufacturing overhead ($8,000 x 150%) 12,000
Total cost of job no. 791 $34,000

Beginning work in process $22,500
Direct material ($2,000 + $9,000) 11,000
Direct labor ($6,000 + $10,000) 16,000
Manufacturing overhead ($16,000 x 150%) 24,000
Total cost of job nos. 789 and 790 $73,500

Sales revenue: $102,900 ($73,500 x 140%)

Rockville, Inc., which uses a job-costing system, began business on January 1, 20x3 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20x3:
• Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively.
• Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor:

Job No. Direct Materials Direct Labor
1 $145,000 $35,000
2 320,000 65,000
3 55,000 80,000

A. $250,000 ÷ $200,000 = 125% of direct labor cost

B. Job no. 3:
Direct material $ 55,000
Direct labor 80,000
Manufacturing overhead ($80,000 x 125%) 100,000
Total cost of job no. 3 $235,000

C. Job nos. 1 and 2:
Direct material ($145,000 + $320,000) $465,000
Direct labor ($35,000 + $65,000) 100,000
Manufacturing overhead ($100,000 x 125%) 125,000
Total cost of job nos. 1 and 2 $690,000

Sales revenue: $1,104,000 ($690,000 x 160%)

D. Actual overhead $233,000
Applied overhead: [($35,000 + $65,000 +
$80,000) x 125%] 225,000
Underapplied overhead $ 8,000

E. Cost of Goods Sold 8,000
Manufacturing Overhead
8,000
F. No. Companies use a predetermined application rate for several reasons, including the fact that manufacturing overhead is not easily traced to jobs and products. The predetermined rate is based on estimates of both overhead and an appropriate cost driver, and situations where these amounts coincide precisely with actual experiences are rare. As a result, under- or overapplied overhead typically arises at year-end.

Athens Corporation uses a job-cost system and applies manufacturing overhead to products on the basis of machine hours. The company's accountant estimated that overhead and machine hours would total $800,000 and 50,000, respectively, for 20x1. Actual costs incurred follow.

Direct material used $250,000
Direct labor 300,000
Manufacturing overhead 816,000

The manufacturing overhead figure presented above excludes $27,000 of sales commissions incurred by the firm. An examination of job-cost records revealed that 18 jobs were sold during the year at a total cost of $2,960,000. These goods were sold to customers for $3,720,000. Actual machine hours worked totaled 51,500, and Athens adjusts under- or overapplied overhead at year-end to Cost of Goods Sold.

A. $800,000 ÷ 50,000 = $16 per machine hour

B. Applied overhead (51,500 x $16) $ 824,000
Actual overhead 816,000
Overapplied overhead $ 8,000

C. Cost of goods sold, as reported $2,960,000
Less: Overapplied overhead 8,000
Cost of goods sold, adjusted $2,952,000

D. The company could have allocated the overapplication to work in process, finished goods, and cost of goods sold. Although this method is acceptable, it is not suggested in this case because of the immaterial dollar amount in relation to cost of goods sold.

Packard Products uses a job-costing system for its units, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The following information relates to the Machining Department for the year just ended:

Budgeted manufacturing overhead $8,000,000
Actual manufacturing overhead 7,975,000
Budgeted machine hours 500,000
Actual machine hours 510,000

The Machining Department data that follow pertain to job no. 243, the only job in production at year-end.

Direct materials $64,800
Direct labor cost 35,200
Machine hours 450

A. Machining overhead rate: $8,000,000 ÷ 500,000 hours = $16 per machine hour

B. The ending work in process is carried at a cost of $107,200, computed as follows:

Direct materials $ 64,800
Direct labor 35,200
Manufacturing overhead (450 x $16) 7,200
Total cost $107,200

C. Actual overhead in the Machining Department amounted to $7,975,000, whereas applied overhead totaled $8,160,000 (510,000 hours x $16). Thus, overhead was overapplied by $185,000 during the year.

D. The department's manufacturing overhead was overapplied by $185,000. As a result of this situation, excessive overhead flowed from Work in Process, to Finished Goods, to Cost of Goods Sold, meaning that the Cost-of-Goods-Sold account must be decreased at year-end.

E. The Work-in-Process account is charged with applied overhead, or $8,160,000.

F. The firm's selection of application bases is likely appropriate. The bases should "drive" the costs, meaning there should be a strong cause-and-effect relationship between the base that is used and the amount of overhead incurred. In the Assembly Department, a considerable portion of the overhead incurred is related to manual-assembly (i.e., labor) operations.

A review of the records of Milgrim, Inc., a new company, disclosed the following year-end information:
• Manufacturing Overhead account: Contained debits of $872,000, which included $20,000 of sales commissions.
• Work-in-Process Inventory account: Contained charges for overhead of $875,000.
• Cost-of-Goods-Sold account: Contained a year-end debit balance of $3,680,000. This amount was computed prior to any year-end adjustment for under- or overapplied overhead.

Milgrim applies manufacturing overhead to production by using a predetermined rate of $20 per machine hour. Budgeted overhead for the period was anticipated to be $900,000.

Required:
A. Determine the actual manufacturing overhead for the year.
B. Determine the amount of manufacturing overhead applied to production.
C. Is overhead under- or overapplied? By how much?
D. Compute the adjusted cost-of-goods-sold figure that should be disclosed on the company's income statement.
E. How many machine hours did Milgrim actually work during the year?
F. Compute budgeted machine hours for the year.

A. $872,000 - $20,000 sales commissions = $852,000

B. $875,000 (given)

C. Manufacturing overhead is overapplied by $23,000 ($875,000 - $852,000).

D. Cost of goods sold $3,680,000
Less: Overapplied overhead 23,000
Cost of goods sold, adjusted $3,657,000

E. Milgrim would have applied overhead to production by using the actual machine hours worked and the $20 application rate. Thus, the actual hours worked total 43,750 ($875,000 ÷ $20).

F. $900,000 ÷ $20 = 45,000 hours

A. Direct material $ 29,000
Direct professional labor 42,000
Applied overhead ($42,000 x 125%*) 52,500
Total cost to redecorate $123,500

*$800,000 $640,000 = 125%

B. Applied overhead ($655,000 x 125%) $818,750
Actual overhead 793,000
Overapplied overhead $ 25,750

71. Boswell and Associates designs relatively small sports stadiums and arenas at various sites throughout the country. The firm's accountant prepared the following budget for the upcoming year:

Professional staff salaries $3,000,000
Administrative support staff 800,000
Other operating costs 200,000

Eighty percent of professional staff salaries are directly traceable to client projects, a figure that falls to 60% for the administrative support staff and other operating costs. Traceable costs are charged directly to client projects; nontraceable costs, on the other hand, are treated as firm overhead and charged to projects by using a predetermined overhead application rate.

Boswell had one project in process at year-end: an arena that was being designed for Charlotte County. Costs directly chargeable to this project were:

Professional staff salaries $90,000
Administrative support staff 17,300
Other operating costs 6,700

Answer:
A. Professional staff salaries $3,000,000
Administrative support staff 800,000
Other operating costs 200,000
Subtotal $4,000,000
Less: Direct costs
Professional staff salaries ($3,000,000 x 80%) $2,400,000
Administrative support staff and other costs [($800,000 + $200,000) x 60%]
600,000
3,000,000
Nontraceable costs (i.e., overhead) $1,000,000

Predetermined application rate: $1,000,000 ÷ $3,000,000 = 33.33%
B. Professional staff salaries $ 90,000
Administrative support staff 17,300
Other operating costs 6,700
Subtotal $114,000
Overhead: $114,000 x 33.33% 38,000
Total $152,000

C. Possible examples include travel, overnight delivery fees, postage, selected costs related to conducting focus-group studies, photocopying, and supplies related to model construction.

KLP provides consulting services and uses a job-order system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by KLP, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup.

KLP anticipates the following costs for the upcoming year:

Cost Percentage of Cost
Directly Traceable
to Clients
Professional staff salaries $5,000,000 80%
Administrative support staff 600,000 50
Travel 200,000 80
Other operating costs 200,000 20
Total $6,000,000

Answer:
A. Traceable costs total $4,500,000, computed as follows:

Total Cost Percent
Traceable Traceable
Cost
Professional staff salaries $5,000,000 80% $4,000,000
Administrative support staff 600,000 50 300,000
Travel 200,000 80 160,000
Other operating costs 200,000 20 40,000
Total $6,000,000 $4,500,000

KLP's overhead (i.e., the nontraceable costs) totals $1,500,000 ($6,000,000 - $4,500,000).

B. Predetermined overhead rate: $1,500,000 ÷ $4,500,000 = 33.33%
C. Target profit percentage: $480,000 ÷ $6,000,000 = 8%
D. The total cost of the Lawson Manufacturing project is $120,000, and the billing is $129,600, as follows:

Professional staff salaries
$ 68,000
Administrative support staff 8,900
Travel 10,500
Other operating costs 2,600
Subtotal $ 90,000
Overhead ($90,000 x 33.33%) 30,000
Total cost $120,000
Markup ($120,000 x 8%) 9,600
Billing to Lawson $129,600

When manufacturing overhead is applied to production which of the following accounts is credited?

Which account is credited when manufacturing overhead is applied quizlet?

When manufacturing overhead is applied to production it is added to quizlet?

When materials are used in production which of the following accounts is credited?