Assignment:
Grand Island Brake Co. budgeted the following variable and ?xed overhead costs for 2010:
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Variable indirect labor
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$100,000
|
|
Variable indirect materials
|
20,000
|
|
Variable utilities
|
80,000
|
|
Variable portion of other mixed costs
|
120,000
|
|
Fixed machinery depreciation
|
62,000
|
|
Fixed machinery lease payments
|
13,000
|
|
Fixed machinery insurance
|
16,000
|
|
Fixed salaries
|
75,000
|
|
Fixed utilities
|
12,000
|
The company allocates overhead to production using machine hours. For 2010, ma-
chine hours have been budgeted at 40,000.
a. Determine the predetermined variable and ?xed OH rates for Grand Island Brake Co. The company uses separate variable and ?xed manufacturing overhead control accounts.
b. During 2010, the company used 43,000 machine hours during production and incurred a total of $273,600 of variable overhead costs and $185,680 of ?xed over- head costs. Prepare journal entries to record the incurrence of the actual overhead costs and the application of overhead to production.
c. What amounts of under applied or over applied overhead exist at year-end 2010?
d. The company's management believes that the ?xed overhead amount calculated in part (a) should be considered immaterial. Prepare the entry to close the Fixed Overhead Control account at the end of the year.
e. Management believes that the variable overhead amount calculated in part (a) should
be considered material and should be prorated to the appropriate accounts. At year-
end, balances were as follows for inventory and Cost of Goods Sold accounts:
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Raw Material Inventory
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$ 25,000
|
|
Work in Process Inventory
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234,000
|
|
Finished Goods Inventory
|
390,000
|
|
Cost of Goods Sold
|
936,000
|
Prepare the entry to close the Variable Overhead Control account at the end of the year.