14 May Acc 220 Chap 3
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in 2General studies
ch 3 Excel
| Integrated Example | Ch.3 | Variance is material | ||||||||
| Job Order Costing | Variance must be capitalized @ reporting date for GAAP | |||||||||
| M | WIP | FG | Operating 7 days a week | |||||||
| A. | Overhead Budget for the Year: | Y = a + bX | Beginning | $8,000 | $11,000 | $14,000 | ||||
| Variable Overhead per Direct Labor [DL] Hrs. | $ 2.75 | b | Est | Additions | $45,000 | $92,500 | $27,000 | June | May | |
| Estimated DL hrs. | 42,000 | X | Est | Used/completed/sold | ($43,000) | ($27,000) | ($27,000) | Actual overhead spending | $ 1,085,000 | $ 1,000,200 |
| Variable | $ 115,500 | bX | Est | Ending | $10,000 | $76,500 | $14,000 | Applied overhead | $ 962,000 | $ 933,000 |
| Fixed Overhead | $ 94,500 | a | Est | Under applied | $ 123,000 | $ 67,200 | ||||
| $ 210,000 | $ 210,000 | Y=a+bX | Portion of month in inventory | 30/30 | 18/31 | |||||
| 42,000 | POHR | $ 5.00 | per DL Hr. | 100.0% | 58.1% | |||||
| $5.00 | Dr/(Cr) | Dr/(Cr) | ||||||||
| Dr/(Cr) | Dr/(Cr) | Income statement | Ending inventory/days | 48.00 | ||||||
| Contra acct. or | Inventory | Overhead spending in CoGS | ||||||||
| Liability Acct. | Materials | WIP | FG | CoGS | CoGS | Selling & Admin Exp | Balance in inventory @ June end | $ 162,019 | ||
| May ending Inventory [Beginning fo June] | $8,000 | $11,000 | $14,000 | Period | ||||||
| June Ending Inventory before adjustment | $10,000 | $76,500 | $14,000 | |||||||
| Material in production | ||||||||||
| June Activity | Beginning | $8,000 | ||||||||
| 1 | Purchase Materials | A/P | ($45,000) | $45,000 | Added | $45,000 | ||||
| Ending | ($10,000) | |||||||||
| 2 | Issued Materials from inventory | $43,000 | materials from inventory used in period | Cost including allocation of Fixed Cost | ||||||
| Materials for products | ($43,000) | $40,000 | ($3,000) | less materials to overhead | Variable Cost: Direct Cost [Direct Labor & Materials] + | |||||
| Indirect materials | $3,000 | $40,000 | Materials used in production | Variable overhead [within a relevant range] | ||||||
| Marginal Cost: the out-of-packet costs to produce [sell] next unit | ||||||||||
| 3 | Payroll for Period | Total Manufacturing costs | ||||||||
| Sales Salaries | $2,000 | Materials | $40,000 | Manufacturing Overhead Control | ||||||
| Direct labor charges to jobs [3500 hrs.@$10/hr] | Wage payable | ($49,000) | $35,000 | DL | SG&A | DL | $35,000 | Accounts are resident in CoGS | ||
| Indirect manufacturing labor | $12,000 | Applied overhead | $17,500 | Spending Accounts | ||||||
| Mfg.OH | $92,500 | Salary Expense | 66,000 | |||||||
| 4 | Other Manufacturing overhead spending | Wage Expense | 78,000 | |||||||
| Utilities | ($1,700) | $1,700 | Production Direct labor | 215,000 | ||||||
| Accum. Depreciation | ($2,900) | $2,900 | Fringe benefit expense | 74,000 | ||||||
| $3,000 | ||||||||||
| Factory Property taxes payable | ($1,000) | $1,000 | $12,000 | Commission expense | – 0 | $ 710,000 | Budget/estimated OH Spending | |||
| $1,700 | Advertising expense | 750 | 35500 | Budget/estimated Dl Hrs. | ||||||
| 5 | Apply overhead to jobs using POHR | 3500 | hrs | $17,500 | ($17,500) | $2,900 | Building rent expense | 21,000 | $ 20.00 | POHR |
| $ 5.00 | $1,000 | Equipment lease expense | 5,800 | 34,000 | Acutal DL Hrs. | |||||
| 6 | Incur Selling expense-Advertising | $3,500 | $750 | $20,600 | Office supply expense | 2,300 | $680,000 | Applied Overhead | ||
| Contract labor Expense | 34,000 | |||||||||
| 7 | Completed Work from WIP | ($27,000) | $27,000 | Beginning | $11,000 | WIP | Travel/entertainment exp. | 2,000 | ||
| added | $92,500 | Professional services | 3,200 | |||||||
| Ending | ($76,500) | WIP | Bank charges/fees | – 0 | ||||||
| To FG | $27,000 | Cost of Goods manufactured | Depreciation expense | 144,000 | ||||||
| Miscellaneous expense | 3,950 | |||||||||
| 8 | Sold FG to Customer | ($27,000) | $27,000 | Beginning | $14,000 | Total | 650,000 | this had been debited to CoGS | ||
| added | $27,000 | inventory did NOT change | ||||||||
| Ending | ($14,000) | usually beginning ≠ ending | Applied overhead | (680,000) | this was credited thru Applied OH acct. to CoGS | |||||
| To CoGS | $27,000 | Cost of Goods Sold [CoGS] | ||||||||
| Net Effect | (30,000) | decrease CoGS | ||||||||
| B 1 | End of period adjustment for over/under applied overhead | WIP | FG | $3,100 | ←Sum | under applied overhead | +Q51+P51 | |||
| $s applied OH in Inventory [less than 1 Mo. In Inv.] GIVEN | Memo | $10,000 | $1,500 | MOH remaing in Inv. | % Underapplied | ($17,500) | $20,600 | 17.7% | $3,100 | |
| Add | 17.7% | $1,771 | $266 | ($2,037) | Entry | 17.7% | Applied | Spending | under | -17.7% |
| Overhead is applied on labor Hrs | Inventory up | 65.71% | applied | |||||||
| Dr. Inventory= Under applied [inventory too low, profit too low] | 87% | 13% | $3,100 | WIP | FG | 35000 | 17500 | |||
| (Cr.) Inventory= over applied [Inventory too high, profit too high] | $10,000 | $1,500 | $11,500 | 3500 | 3500 | |||||
| If over applied Cr. Inventory AND dr. CoGS | +11500/17500 = | 65.71% | of a month | 10 | 5 | |||||
| +66% * $3100 | $2,037 | |||||||||
| B 2 | End of period adjustment for over/under applied overhead | WIP | FG | $7,264 | ←Sum | under applied overhead | Integrated Example | |||
| $s applied OH in Inventory [more than 1 Mo. In Inv.] | Memo | $8,000 | $32,000 | çççççMore than one month | ||||||
| ($728) | $ (2,914) | $3,642 | Entry | |||||||
| Overhead is applied on labor Hrs | Inventory up | |||||||||
| Dr. Inventory= Under applied [inventory too low, profit too low] | ||||||||||
| (Cr.) Inventory= over applied [Inventory too high, profit too high] | ||||||||||
| If over applied Cr. Inventory AND dr. CoGS | $40,000 | Applied in inventory | ||||||||
| $17,500 | Applied this Mo | |||||||||
| $16,000 | Applied prior Mo | |||||||||
| $16,500 | Applied 2nd Mo. Prior | |||||||||
| Over/(under applied) | Adjustment to ending inventory | |||||||||
| # mo Applied in inventory | 1.00 | $17,500 | Applied this Mo | ($3,100) | $ (3,100) | 17.7% | under | applied | ||
| 1.00 | $16,000 | Applied prior Mo | $600 | $ 600 | given | |||||
| 0.39 | $6,500 | Applied 2nd Mo. Prior | ($2,900) | $ (1,142) | given | |||||
| 2.39 | $ 40,000 | ($5,400) | $ (3,642) | |||||||
| $8,000 | $32,000 | $40,000 | ||||||||
| 20.0% | 80.0% | 100.0% | ||||||||
| $ (728) | $ (2,914) | $ (3,642) |
Ch 3 HW
| Chapter 3 | |||||
| HW—ACC220—HCT | |||||
| Assume over/under applies to ending inventory | |||||
| hours= Basis for POHR | |||||
| Capacity/hrs. | 10,500 | ||||
| Budget/Hrs | 9,600 | basis for POHR | |||
| Budgeted overhead spending $s | 82,560 | 8.6 | |||
| Actual/Hrs | 9,300 | ||||
| Ending is before over/under applied | Raw Materials | WIP | FG | Total | Overhead |
| Beginning Inventory $s | 125,000 | 44,000 | 189,000 | 358,000 | |
| Total Ending Inventory $s | 131,000 | 39,000 | 175,000 | 345,000 | |
| Overhead in inventory | 11,000 | 69,840 | 80,840 | ||
| Actual Period Spending | |||||
| Purchased material to Raw Matls. | 175,000 | Note to get addition to WIP for materials | |||
| Direct labor spending | 18,000 | + Beginning + adds to Materials – ending materials = materials into WIP [ WIP additions for materials] | |||
| Overhead spending | 89,000 | ||||
| [A] What is POHR & what is over/under applied using Actual spending, actual production & budget hrs. based POHR | |||||
| POHR = | $8.60 | ||||
| Applied overhead = | |||||
| Overapplied | or | either over OR under not both | |||
| Underapplied | |||||
| [B] Actual Cost of goods manufactured using budget overhead rate as POHR before applying over/under applied overhead | |||||
| From WIP to FG | |||||
| Show calculations | |||||
| COG Manufactured | Look up the formulae; see PPT and/or excel | ||||
| [C]Based on Ending inventory $s, inventory is to be adjusted, show adjustment to inventory for over /under applied overhead using budgeted POHR | |||||
| Show calculations | WIP | FG | adjustment only overhead | ||
| Ending total | 39,000 | 175,000 | |||
| Ending Overhead | 11,000 | 69,840 | equals exactly one month of inventory combined | ||
| Adjustment | |||||
| Adjusted Ending | |||||
| determine what portion of the month applied is in inventory at PE | |||||
| then how much is in WIP how muck in FG | |||||
| [D] What is Cost of goods manufactured using Capacity overhead rate as POHR before applying over/under applied overhead | |||||
| Show calculations | |||||
| POHR = | |||||
| Applied overhead = | |||||
| Overapplied | or | either over OR under not both | |||
| Underapplied | |||||
| COG Manufactured |
Sheet3
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