Magic Floor produces and sells a complete line of floor care products: wax strippers, floor soaps, and
Question:
The 2017 budget for the fill line is:
Maintenance ............................. $ 77,000
Indirect labor ............................. 182,000
Depreciation .............................. 127,000
Utilities ..................................... 29,000
Indirect supplies .......................... 27,000
Magic Floor's 2017 budgeted production is:
Magic Floor allocates the fill line costs to the various bottled products using a predetermined overhead absorption rate calculated based on budgeted costs divided by budgeted volume. Budgeted volume is measured in seconds on the fill line. Pints are filled in 3 seconds, quarts in 5 seconds, half-gallons in 9 seconds, and gallons in 17 seconds.
During 2017, the following times (in seconds) were recorded for filling bottles on the fill line:
Actual overhead costs incurred in 2017 on the fill line are:
Maintenance ............................... $ 76,000
Indirect labor ............................... 179,000
Depreciation ................................ 127,000
Utilities ....................................... 28,000
Indirect supplies ............................ 25,000
Required:
a. Calculate the expected volume of the bottling fill line for 2017.
b. Calculate the normal volume of the bottling fill line for 2017.
c. Calculate the overhead absorption rate for the bottling fill line for 2017 based on expected volume (round overhead rate to four decimals).
d. Calculate the overhead absorption rate for the bottling fill line for 2017 based on normal volume (round overhead rate to four decimals).
e. Calculate the over/underabsorbed overhead amount for the bottling fill line for 2017 based on expected volume.
f. Calculate the over/underabsorbed overhead amount for the bottling fill line for 2017 based on normal volume.
g. Explain in intuitive terms why your answers in parts (e) and (f) differ.
Step by Step Answer:
Accounting for Decision Making and Control
ISBN: 978-1259564550
9th edition
Authors: Jerold Zimmerman