# One Company applies manufacturing overhead

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1) One Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total \$313,000 for the year, and machine usage is estimated at 125,200 hours.

For the year, \$337,611 of overhead costs are incurred and 132,700 hours are used.
(a)Compute the manufacturing overhead rate for the year. (Round answers to 2 decimal places, e.g. 1.25.)
Manufacturing overhead rate \$ _________ per machine hour

2) The ledger of Cust Company has the following work in process account.

Work in Process—Painting
5/1 Balance 4,660 5/31 Transferred out ?
5/31 Materials 7,150
5/31 Labor 3,700
5/31 Balance ?

Production records show that there were 400 units in the beginning inventory, 30% complete, 1,470 units started, and 1,560 units transferred out. The beginning work in process had materials cost of \$2,930 and conversion costs of \$1,730. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.

(a) How many units are in process at May 31?
Work in process, May 31 ________units

(b) What is the unit materials cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)
The unit materials cost for May \$ ______________

(c) What is the unit conversion cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)
The unit conversion cost for May \$ ________

(d) What is the total cost of units transferred out in May? \$________

(e) What is the cost of the May 31 inventory? \$__________

3) Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.
Standard Custom
Direct labor costs \$55,700 \$112,000
Machine hours 1,300 1,320
Setup hours 96 410

Total estimated overhead costs are \$300,200. Overhead cost allocated to the machining activity cost pool is \$196,600, and \$103,600 is allocated to the machine setup activity cost pool.

(a)Compute the overhead rate using the traditional (plantwide) approach. (Round answers to 2 decimal places, e.g. 12.25%.)
Predetermined overhead rate ________% of direct labor cost

(b) Compute the overhead rates using the activity-based costing approach.

(c) Determine the difference in allocation between the two approaches.

4)
Using these data from the comparative balance sheet of Rosalez Company, perform vertical analysis. (Round percentages to 1 decimal place, e.g. 12.5%.)
Dec. 31, 2012 Dec. 31, 2011
Amount Percentage Amount Percentage
Accounts receivable\$ 546,000 _____% \$ 353,000 _____ %
Inventory \$ 750,500 ______% \$ 612,600 ______ %
Total assets \$3,149,000 _____% \$2,841,100 _____ %

5) Vertical analysis (common-size) percentages for Vallejo Company’s sales, cost of goods sold, and expenses are listed here.
Vertical Analysis 2012 2011 2010
Sales 100 % 100% 100%
Cost of goods sold 61.7 63.5 65.3
Expenses 24.2 27.8 29.2

Did Vallejo’s net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer.

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