Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.
(a) Compute the manufacturing overhead rate for the year.
(b) What is the amount of under- or overapplied overhead at December 31?
(c) Prepare the adjusting entry to assign the under- or over applied overhead for the year to cost of goods sold.
E16-3 The ledger of Custer Company has the following work in process account.
Work in Process– Painting
5/1 Balance 3,590 5/31 Transferred out ?
5/31 Materials 5,160
5/31 Labor 2,740
5/31 Overhead 1,380
5/31 Balance ?
Production records show that there were 400 units in the beginning inventory, 30% complete, 1,400 units started, and 1,500 units transferred out. The beginning work in process had materials cost of $2,040 and conversion costs of $1,550. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.
(a) How many units are in process at May 31?
(b) What is the unit materials cost for May?
(c) What is the unit conversion cost for May?
(d) What is the total cost of units transferred out in May?
(e) What is the cost of the May 31 inventory?
Direct labor cost 45,600. 115,000
Machine Hours 1,490 1,470
Setup hours 110 410
Total estimated overhead costs are $298,500. Overhead cost allocated to the machining activity cost pool is $195,800, and $102,700 is allocated to the machine setup activity cost pool.