6. (10 points) Cost flows and Unit Product Costs in Activity-Based Costing Hunter Corporation uses activity-based...

  

Transcribed Image Text:

6. (10 points) Cost flows and Unit Product Costs in Activity-Based Costing Hunter Corporation uses activity-based costing to determine product costs for external financial reports. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools: Activity Cost Pool Activity Measure Labor related Production orders...... Material receipts... Relay assembly. General factory Activity Cost Pool Direct labor-hours Number of orders Number of receipts Number of relays Machine-hours Labor related. Production orders. Material receipts... Relay assembly General factory Required (1). Compute the activity rate (i.c., predetermined overhead rate) for each of the activity cost pools. (2). During the year, actual overhead cost and activity were recorded as follows: Actual Overhead Cost Activity Cost Pool Labor related (DLHS).…........ Estimated Overhead Cost Production orders (orders).... Material receipts (receipts)..... $200,000 $110,000 $ 205,000 107,000 112,000 980,000 1,300,000 Total overhead cost...... $2.704,000 a. Prepare a journal entry to record the incurrence of actual manufacturing overhead cost for the year (credit Accounts Payable). Post the entry to the company's Manufacturing Overhead T-account. b. Determine the amount of overhead cost applied to production during the year. c. Prepare a journal entry to record the application of manufacturing overhead cost to Work in Process for the year. Post the entry to the company's Manufacturing Overhead T-account. Relay assembly (relays).. General factory (MHS).......... $108,000 $960,000 $1,260,000 ******* d. Determine the amount of underapplied or overapplied manufacturing overhead for the year. (3). The actual activity for the year was distributed among the company's four products as follows: Expected Activity 20,000 DLHS 5,000 orders 1,800 receipts 12,000 relays 70,000 MHs Actual Activity 22,000 DLHs 4,500 orders 2,000 receipts 13,000 relays 73,000 MHs Actual Activity Product B Product C Product D Product A 7,000 1,000 8,000 800 900 1,100 400 800 300 3,500 2,000 3,000 16,000 26,000 17,000 6,000 1,700 500 4,500 14,000 a. Determine the total amount of overhead cost applied to each product. b. Does the total amount of overhead cost applied to the products above tie in to the T-accounts in any way? Explain. 6. (10 points) Cost flows and Unit Product Costs in Activity-Based Costing Hunter Corporation uses activity-based costing to determine product costs for external financial reports. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools: Activity Cost Pool Activity Measure Labor related Production orders...... Material receipts... Relay assembly. General factory Activity Cost Pool Direct labor-hours Number of orders Number of receipts Number of relays Machine-hours Labor related. Production orders. Material receipts... Relay assembly General factory Required (1). Compute the activity rate (i.c., predetermined overhead rate) for each of the activity cost pools. (2). During the year, actual overhead cost and activity were recorded as follows: Actual Overhead Cost Activity Cost Pool Labor related (DLHS).…........ Estimated Overhead Cost Production orders (orders).... Material receipts (receipts)..... $200,000 $110,000 $ 205,000 107,000 112,000 980,000 1,300,000 Total overhead cost...... $2.704,000 a. Prepare a journal entry to record the incurrence of actual manufacturing overhead cost for the year (credit Accounts Payable). Post the entry to the company's Manufacturing Overhead T-account. b. Determine the amount of overhead cost applied to production during the year. c. Prepare a journal entry to record the application of manufacturing overhead cost to Work in Process for the year. Post the entry to the company's Manufacturing Overhead T-account. Relay assembly (relays).. General factory (MHS).......... $108,000 $960,000 $1,260,000 ******* d. Determine the amount of underapplied or overapplied manufacturing overhead for the year. (3). The actual activity for the year was distributed among the company's four products as follows: Expected Activity 20,000 DLHS 5,000 orders 1,800 receipts 12,000 relays 70,000 MHs Actual Activity 22,000 DLHs 4,500 orders 2,000 receipts 13,000 relays 73,000 MHs Actual Activity Product B Product C Product D Product A 7,000 1,000 8,000 800 900 1,100 400 800 300 3,500 2,000 3,000 16,000 26,000 17,000 6,000 1,700 500 4,500 14,000 a. Determine the total amount of overhead cost applied to each product. b. Does the total amount of overhead cost applied to the products above tie in to the T-accounts in any way? Explain.

Answer rating: 100% (QA)

Solution 1 The activity rates are computed as follows Activity Cost Pool a b a b Estimated Overhead Cost Expected Activity Activity Rate Labor related ... View the full answer