1. Kater Company makes bookshelves. The company receives pre-cut lumber, drills holes in the wood so mobile shelving can be installed, then assembles and paints the units. Classify each of the following items of manufacturing overhead as either fixed or variable costs.

a. Drilling Department Supervisor
b. Oil used to lubricate drill press machines
C. Propane for forklifts used to move material from the Drilling Department to the Assembly Department
d. Natural gas used to heat the plant.
e. Security guard
F. Safe in the factory building.
g. Electricity to drive drilling machines
H. Factory building rental

2. At the end of the year, Jenkins Corporation had $120,000 in the factory overhead account and $100,000 in the applied factory overhead account. Mark Gibbs, the controller, has decided that the overhead difference is too large to close with the Cost of Goods Sold account alone. He decides it is best to charge the overhead difference to the Work in Process, Finished Goods, and Cost of Goods Sold accounts. The balance of these three accounts is:

Work in Progress $30,000

Finished goods $60,000

Cost of goods sold $210,000

How much of the overhead difference will be charged to the Cost of Goods Sold account?

3. Lynch Audio produces stereo components for a major manufacturer of car stereos. You currently use the machine-hours method to apply factory overhead to production. The information for the previous year is as follows:

	budgeted amounts	actual amounts
Factory overhead	$3,000,000	$3,050,000
Direct labor hours @ $10 per hour	$250,000	$248,000
# of machine hours	750.000	735,000

During the year, Lynch produced a new product, Super Tweeters, which involved $27,000 in material, 3,100 direct labor hours, and 4,500 machine hours.

a. Calculate the default factory overhead rate based on machine hours.
b. Calculate the amount of underapplied or overapplied manufacturing overhead.

Answer rating: 100% (QA)

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