07 Aug Stockin Company Produces Tablets And Books
Milsaps Company produces sportsmen’s digital scales. In preparing the current budget, Milsaps’ controller estimates a total of $298,000 in direct materials cost, $242,000 in direct labor cost, and $421,080 in manufacturing overhead costs. Since much of the production process requires skilled workers to assemble the scales, direct labor cost is used as the overhead application base. At the end of the period, Milsaps reported actual results as follows: direct materials cost of $303,000, direct labor cost of $200,000, and manufacturing overhead cost $343,130.
(a) What is Milsaps’ predetermined overhead rate for the year?
(b).How much manufacturing overhead did Milsaps apply during the year?
(c). What is the journal entry to close overhead if the amount is considered to be insignificant?
Stockin Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.
| Activity Pool | Department Costs | Cost driver | ||
| Binding | $252,843.75 | Number of units | ||
| Printing | 773,647.00 | Machine hours | ||
| Product design | 217,782.00 | Change orders | ||
| General | 352,777.25 | None | ||
| Total overhead costs | $1,597,050.00 |
Other information is as follows:
| Tablets | Books | |||
| Units | 77,500 | 19,375 | ||
| Direct materials cost per unit | $4.00 | $12.00 | ||
| Direct labor cost per unit | $5.00 | $10.00 | ||
| Direct labor hours | 27,300 | 13,650 | ||
| Machine hours | 139,900 | 104,925 | ||
| Change orders | 1,962 | 3,924 |
(a) Determine the unit product cost for Tablets and Books using the traditional costing system
(b) Determine the unit product cost for Tablets using the traditional costing system.(Round answer to 2 decimal places, e.g. 1.64.)
(c) Calculate ABC rates
(d) Determine the unit product cost for Tablets and Books using the activity-based costing system.
(e) Show that General cost is the difference between the total overhead costs allocated to products under the traditional system and the total cost allocated to products under the activity-based costing system.
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