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14. LO.1 (Predetermined OH rate) Cairo Productions applies overhead using a combined
rate for fixed and variable overhead. The rate is 125 percent of direct labor cost. During
the first three months of the current year, actual costs were incurred as follows: Direct
Labor Cost Actual Overhead January $360,000 $440,000 February 330,000 420,000
March 340,000 421,000 a. What amount of overhead was applied to production in each of
the three months? b. What was the underapplied or overapplied overhead for each of the
three months and for the first quarter?
16. LO.2 (Underapplied and overapplied overhead) At the end of 2008, Westmeier
Corporation’s accounts showed a $33,000 credit balance in Manufacturing Overhead
Control. In addition, the company had a following account balance: Work In Process
Inventrory $192,000 Finished Goods Inventory 48,000 Cost of Goods Sold
360,000 a. Prepare the necessary journal entries to close the overhead account if the
balance is considered immaterial. b. Prepare the necessary journal entries to close the
overhead account if the balance is considered material. c. Which method do you believe
is more appropriate for the company and why?
21. LO.4 (High-Low Method) Information about SnoCo’s utility cost for the last six
months of 2008 follows, The high-low method will be used to develop a cost formula to
predict 2009 utility charges, and the number machine hours has been found to be an
appropriate cost driver. Data for the first half of 2008 are not being considered because
the utility company imposed a significant tare change as of July 1, 2008. Month Machine
Hours Utility Cost July 33,750 $6,500 August 34,000 6,100 September 33,150 5,070
October 32,000 5,980 November 31,250 5,750 December 31,000 5,860 a. What is the
cost formula for utility expense? b. What is the budgeted utility cost for September 2009
if 33,175 machine hours are projected?
30. LO.6 & LO.7 (Absorption vs. variable costing) Eastern Chemical Company uses
variable costing to manage its internal operations. The following data relate to the
company’s first year of operations, when 50,000 25000 units were produced and 46,000
21000 units were sold. Variable costs per unit Direct material $50 Direct labor 30
Variable overhead 14 Variable selling costs 12 Fixed Costs Selling and Administrative
$750,000 Manufacturing 500,000 How much higher (or lower) would the company’s first
year net income have been if absorption costing had been used rather than variable
costing? Show Computations.