Directions: Complete the three questions below and please be
sure to show all of your calculation work along with the final answers in the
box provided for each question. Also note that Question #3 has TWO parts, Part
A and Part B. To give yourself more room to insert your calculations and
answers, you may need to add more rows or columns to the boxes below.
1. Biltz Company uses a predetermined manufacturing overhead
rate based on direct labor hours to allocate (apply) manufacturing overhead
costs to jobs. During the year, the company actually incurred total
manufacturing overhead costs of $582,000 and 135,000 direct labor hours were
worked. The company originally estimated that it would incur $525,000 of
manufacturing overhead during the year and that 150,000 direct labor hours
would be worked.
How much was manufacturing overhead over-allocated
(over-applied) or under-allocated (under-applied) for the year?
2. The following
account balances at the beginning of January were selected from the general
ledger of Ocean City Manufacturing Company:
Work-in-process (WIP) inventory $0
Raw materials inventory $28,000
Finished goods inventory $40,000
1) Actual manufacturing overhead for January amounted to
2) Total direct labor cost for January was $63,000.
3) The predetermined manufacturing overhead rate is based on
direct labor cost. The budget for the year called for $250,000 of direct labor
cost and $350,000 of manufacturing overhead costs.
4) The only job unfinished on January 31 was Job No. 151,
for which total direct labor charges were $5,200 (800 direct labor hours) and
total direct material charges were $14,000.
5) Cost of direct materials placed in production during
January totaled $123,000. There were no indirect material requisitions during
6) January 31 balance in raw materials inventory was
7) Finished goods inventory balance on January 31 was
What is the cost of goods manufactured for January? Show
your work for full credit.
3. Vintage Fun
reproduces old-fashioned style roller skates and skateboards. The annual
production and sales of roller skates is 950 units, while 1,750 skateboards are
produced and sold. The company has traditionally used direct labor hours to
allocate its overhead to products. Roller skates require 2.5 direct labor hours
per unit, while skateboards require 1.25 direct labor hours per unit. The total
estimated overhead for the period is $114,300. The company is looking at the
possibility of changing to an activity-based costing system for its products.
If the company used an activity-based costing system, it would have the
following three activity cost pools:
3a. What is the predetermined overhead allocation rate using
the traditional costing system?
3b. What is the overhead cost per skateboard using an
activity-based costing system?
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