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EB 1.

LO 6.1Green Bay Cheese Company estimates its overhead to be $375,000. It expects to have 125,000 direct labor hours costing $1,500,000 in labor and utilizing 15,000 machine hours. Calculate the predetermined overhead rate using:

  1. Direct labor hours
  2. Direct labor dollars
  3. Machine hours
EB 2.

LO 6.1Boarders estimates overhead will utilize 160,000 machine hours and cost $80,000. It takes 4 machine hours per unit, direct material cost of $5 per unit, and direct labor of $5 per unit. What is the cost of each unit produced?

EB 3.

LO 6.1A company estimated 50,000 direct labor hours and $450,000 in overhead. The actual overhead was $445,000, and there were 50,500 direct labor hours. What is the predetermined overhead rate, and how much was applied during the year?

EB 4.

LO 6.1Cozy, Inc., manufactures small and large blankets. It estimates $950,000 in overhead during the manufacturing of 360,000 small blankets and 120,000 large blankets. What is the predetermined overhead rate if a small blanket takes 2 hours of direct labor and a large blanket takes 3 hours of direct labor?

EB 5.

LO 6.2Identify appropriate cost drivers for these cost pools:

  1. material cost pool
  2. machine cost pool
  3. painting cost pool
  4. maintenance cost pool
EB 6.

LO 6.2Match the activity with the most appropriate cost driver.

Activities and Cost Drivers
Activity Cost Driver
Factory maintenance Number of setups
Payroll tax Number of employees
Rent Square feet
Machine setups Direct labor hours
Factory supervision  
Table 6.3
EB 7.

LO 6.3Rocks Industries has two products. They manufactured 12,539 units of product A and 8,254 units of product B. The data are:

Activity in Cost Pool, Estimated Overhead, Product A, and Product B, respectively. Cost Pool 1. $32,400, 1,500, 3,000. Cost Pool 2. 54,900, 1,700, 1,300. Cost Pool 3. 51,380, 1,390, 1,000.

What is the activity rate for each cost pool?

EB 8.

LO 6.3Rocks Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are:

Activity, Overhead per Activity, and Annal Usage, respectively. Machine Setups, $75,000, 6,000. Machine Hours, $85,002, 5,484. Inspections, 70,000, 20,000.

Compute the overhead rate for each activity.

EB 9.

LO 6.3Frenchy’s makes two types of scarves: polyester (poly) and silk. There are two cost pools: setup, with an estimated $120,000 in overhead, and inspection, with $30,000 in overhead. Poly is estimated to have 800,000 setups and 450,000 inspections, while silk has 400,000 setups and 150,000 inspections. How much overhead is applied to each product?

EB 10.

LO 6.3Frenchy’s has three cost pools and an associated cost driver to allocate the costs to the product. The cost pools, cost driver, estimated overhead, and estimated activity for the cost pool are:

Cost Pool, Cost Driver, Estimated Activity per Driver, and Estimated Overhead, respectively. Material, Material requisitions, 250,000, $105,000. Machining, Machine hours, 360,750, 432,900. Inspection, Number of inspections, 25,000, 15,750.

What is the predetermined overhead rate for each activity?

EB 11.

LO 6.3Carboni recently added a carbon line in addition to its aluminum line. The following are estimates to be used in determining the overhead allocation rate for ABC.

Cost Pool, Cost Driver, Estimated Overhead, Carbon, and Aluminum, respectively. Material Handling, Material requisitions, $45,000, 120,000, 60,000. Machine Setups, Number of setups, 55,000, 80,000, 30,000. Assembly, Number of parts, 25,000, 35,000, 15,000.

What would be the predetermined rate for each cost pool?

EB 12.

LO 6.3Assign each of the following expenses to either the machine cost pool or the factory cost pool:

  1. property taxes
  2. heat and air-conditioning
  3. electricity, machines
  4. plant depreciation
  5. electricity, plant
  6. machine maintenance wages
EB 13.

LO 6.4Stacks manufactures two different levels of hockey sticks: the Standard and the Slap Shot. The total overhead of $600,000 has traditionally been allocated by direct labor hours, with 400,000 hours for the Standard and 200,000 hours for the Slap Shot. After analyzing and assigning costs to two cost pools, it was determined that machine hours is estimated to have $450,000 of overhead, with 30,000 hours used on the Standard product and 15,000 hours used on the Slap Shot product. It was also estimated that the inspection cost pool would have $150,000 of overhead, with 25,000 hours for the Standard and 5,000 hours for the Slap Shot. What is the overhead rate per product, under traditional and under ABC costing?

EB 14.

LO 6.5Crafts 4 All has these costs associated with production of 12,000 units of accessory products: direct materials, $19; direct labor, $30; variable manufacturing overhead, $15; total fixed manufacturing overhead, $450,000. What is the cost per unit under both the variable and absorption methods?

EB 15.

LO 6.5Using this information from Outdoor Grills, what is the cost per unit under both variable and absorption costing?

Production 90,000. Direct materials $110. Direct labor 150. Variable manufacturing overhead 75. Fixed manufacturing overhead 2,700,000.
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