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Alex Gilliam
ACC 543
Chapter 4 & 6 Homework
CHAPTER 4
Problem 4-
1.) Predetermined overhead rate is $160 of direct staff cost.
Costs of subcontracted work $ Direct staff costs $13, Studio overhead $21, Total cost to January 31 $40,
2.)Therefore the total cost on January 31 is $40,
Problem 4-
1.) $1,530,000/85,000 hrs = (Manufacturing overhead / number of hours)
2.) $270,000 (manufacturing OH under applied)
Case 4-
1a) Predetermined overhead rate = 160%
1b) $21,200 x 160% = $33,
2a)
Cutting Machining Assembly Estimated manufacturing overhead cost
$540,000 (a) $800,000 (c) $100,000 (e)
Estimated direct labor cost
$300,000 (b) $200,000 (d) $400,000 (f)
Predetermined overhead rate
180% (a)/(b) 400% (c)/(d) 24% (e)/(f)
2b) The sum of overhead applied in all departments is:
3) Use of a plant-wide overhead rate results in a large amount of overhead being charged
because it redistributes overhead costs proportionately between the three departments. This.
can make the difference between bidding too high and losing the job.
4) The bid price is at 150% of manufacturing cost:
= $61,450 x 150%
5a) The applied overhead cost using the plant wide rate of 160% of direct labor is:
= $870,000 x 160%
Accordingly, overhead was under applied by $90,000:
= ($90,000) under applied
5b) The applied overhead cost using the departmental rates of direct labor yield:
Cutting Machining Assembly Total Applied overhead cost:
($320,000 x 80%)
($210,000 x 400%)
($340,000 x 25%) 1,501, Actual overhead cost $560,000^ $830,000^ $92,000^ $1,482, (Underapplied) / over applied overhead cost
CHAPTER 6
Problem 6-
EX300 TX500 Total Sales $1,200,000 $500,000 $1,700, Direct Materials 366,325 162,550 528, Direct Labor 120,000 42,500 162, Manufacturing overhead applied ($3. per direct labor dollar)
Total manufacturing cost 861,925^ 338,075^ 1,200, Product margin $338,075 $161,925 $500,
Disposal fees 420, ($600,000 x 70%)
($600,000 x 0%)
($600,000 x 30%)
($600,000 x 0%) 600,
Equipment depreciation
(80,000 x 50%)
(80,000 x 0%) 32,000^ 8,000^ 80, On-site supplies 33,000^ 9,000^ 12,000^ 6,000^ 60, Office expenses 19,000^ 76,000^ 57,000^ 38,000^ 190, Licensing and insurance 185,000^0 148,000^ 37,000^ 370, Total cost $777,000 $105,000 $499,000 $119,000 $1,500,
2) The activity rates are determined as:
Activity Cost Pool (a) Total Cost^ (b) Total Activity^ (a) / (b) Activity Rate Removing Asbestos $777,
500 thousand sq. ft. $1,554 per thousand sq. ft. Estimating and job setup $105,
200 jobs $525 per job
Working on non routine jobs $499,
25 non routine jobs $19,960 per non routine job
3a) Average and total costs are calculated as:
Routine 2,000 sq. ft. Job: Removing asbestos ($,554 per thousand square feet x 2 thousand square feet) $3, Estimating and job setup ($525 per job x 1 job) 525 Nonroutine job (not applicable) $3, Acerage cost per thousand square feet ($3,633 / 2,000 sq. ft.) $1,816.
3b) Average and total costs are calculated as:
Routine 4,000 sq. ft. Job: Removing asbestos ($1,554 per thousand sq. ft. x 4,000 sq. ft.) $6, Estimating and job setup ($525 per job x 1 job) 525 Nonroutine job (not applicable) 0 Total cost of the job $6, Cost per thousand sq. ft. ($6,741 / 4,000 sq. ft.) $1,685.
3c) Average and total costs are calculated as:
Nonroutine 2,000 sq. ft. Job: Removing asbestos $3, Estimating and job setup 525 Non routine job 19, Total cost of the job $23, Cost per thousand square feet $11,796.
4) No, the activity based data show that there are severe differences in the costs of jobs. While
it may be difficult to anticipate non routine changes in activity, the current bid of $4,000 per
thousand square feet is substantially below what it will actually cost the company to perform
such jobs. The estimator should try to anticipate costs because the difference is substantial and
could have a disastrous effect on the company’s profits.
