Over/Underhead Rates

QUALITYWRITERS.ORG is the ideal place for homework help. If you are looking for affordable, custom-written, high-quality and non-plagiarized papers, your student life just became easier with us. Click the button below to place your order.


Order a Similar Paper Order a Different Paper

P9-5

  Pool
Scrubbers manufactures three different models of swimming pool cleaners (710,
720 and 830).  These are sophisticated
computer-controlled, programed cleaners that scrub and vacuum the pool’s
bottom, walls, and steps and provide supplemental filtration of pool
water.  The three models differ in their
capacity and programmability.

  Pool
Scrubbers use absorption costing system that absorbs manufacturing overhead to
three models based on direct labor hours. 
The single plant wide manufacturing overhead rate is predetermined before
the beginning of the fiscal year using a flexible manufacturing over-head
budget.  Variable manufacturing overhead
is budgeted to be $3.00 per direct labor hour, and fixed manufacturing overhead
is budgeted to be $1.4 million.  Direct
labor is budgeted at $25 per direct labor hour. 
The following table summarizes the budgeted and actual results of
operation for the year:

MODELS

710

720

830

Actual number of units produced

5100

3900

2200

Actual DL hours per unit

3.10

4.20

5.90

Budgeted wholesale price

$550

$750

$1050

Budgeted direct labor hours per scrubber

3.00

4.00

6.00

Budgeted direct materials

$95

$125

$175

Budgeted production (units)

5000

4000

2000

Budgeted DL Cost (@ $25 per DL Hour)

$75

$100

$150

Required:

  1. Calculate the firm wide overhead rate for the
    year (round to four decimals).  The
    overhead rate is calculated before the fiscal year begins.

  2. A batch of 100 units of model 720 is produced
    using 405 direct labor hours.  How much
    overhead is absorbed by this batch of 100 model 720’s

  3. Actual overhead incurred during the year was
    $1,520,500.  Calculate the amount of
    overhead or under absorbed overhead for the year.

Scrubbers write off any over/under absorbed
overhead to the coast of goods sold. 
What is the effect on earnings of writing off the over/under absorbed
overhead calculated in part 3 above on net income?  In other words, does net income increase or
decrease the relative to what net income was prior to the write-off of the
over/under absorbed overhead calculated in part 3 above?

Writerbay.net

Got stuck with a writing task? We can help! Use our paper writing service to score better grades and meet your deadlines.

Get 15% discount for your first order


Order a Similar Paper Order a Different Paper
Writerbay.net