# Project #81128 - Accounting

E2-19 Scatter Diagrams and High-Low Cost Estimation

Assume the local Pearle Vision has the following information on the number of sales orders received and order-processing costs.

 Month                                               Sales Orders                                                            Order-Processing Costs 1                                                              3000                                                                                \$32,000 2                                                                    1,500                                                                                           22,400 3                                                                    4000                                                                             52,000 4                                                                    2,800                                                                                           31,200 5                                                                    2,300                                                                                          25,600 6                                                                    1000                                                                             16,000 7                                                                    2000                                                                             24,000

Required

1. Use information from the high and low volume months to develop a cost-estimating equation for monthly order-processing costs.

2. Plot the data on a scatter diagram. Using the information from representative high and low volume months, develop a cost estimating equation for monthly production costs.

3. What factors might have caused the difference in the equations developed for requirements (a) and (b)?

P5-33 Cost of Goods Manufactured and Income Statement

Following is information from the records of the Calgary Company for July 2012.

 Purchases Raw materials………………..\$ 80,000 Manufacturing supplies…... 3,500 Office supplies…………………. 1,200 Sales…………………………………………….. 425,700 Administrative salaries…………………. 12,000 Direct labor………………………………….. 117,500 Production employees’ fringe benefits*…. 4,000 Sales commissions……………………….. 50,000 Production supervisors’ salaries…… 7,200 Plant depreciation……………………….. 14,000 Office depreciation……………………... 20,000 Plant maintenance……………………… 10,000Plant utilities………………………………. 35,000 Office utilities…………………………….. 8,000 Office maintenance……………………. 2,000 Production equation rent…………… 6,000 Office equation rent…………………... 1,300

 Inventories                                July 1                             July 31 Raw materials                          \$ 17,000                         \$25,000 Manufacturing supplies             1,500                            3,000 Office supplies                             600                           1,000 Work-In-process                          51,000                          40,000 Finished goods                             35,000                          27,100

Required

Prepare a statement of cost of goods manufactured and an income statement. Actual overhead costs are assigned to products.

P5-35 Actual and Predetermined Overhead Rates (Excel)

Allison’s Engines, which builds high performances auto engines for race cars, started operations on January 1, 2012. During the month, the following events occurred:

• Materials costing \$6,500 were purchased on account.

• Direct materials costing \$3,000 were placed in process.

•  A total of 380 direct labor hours was charged to individual jobs at a rate of \$15 per hour.

• Overhead costs for the month of January were as follows:

 Depreciation on building and equipment…………………….\$ 500 Indirect labor………………………………………………………………..  1,500 Utilities…………………………………………………………………………. 600 Property taxes on building……………………………………………. 650 Insurance on building……………………………………………………. 550

• On January 31, only one job (A06) was in process with materials costs of \$600, direct labor charges of \$450 for 30 direct labor hours, and applied overhead.

• The building and equipment were purchased before operations began and the insurance was prepaid. All other costs will be paid during the following month.

Nots: Predetermined overhead rates are used throughout the chapter. An alternative is to accumulate actual overhead costs for the period in Manufacturing Overhead, and apply actual costs at the close of the period to all jobs in process during the period.

Required

1. Assuming Allison’s Engines assigned actual monthly overhead costs to jobs on the basis of actual monthly direct labor hours, prepare an analysis of Work-In-Process for the month of January.

2. Assuming Allison’s Engines uses a predetermined overhead rate of \$10.50 per direct labor hour, prepare an analysis of Work-In-Process for the month of January. Describe the appropriate treatment of any overapplied or underapplied overhead for the month of January.

3. Review the overhead items and classify each as fixed or variable in relation to direct labor hours.

Next, predict the actual overhead rates for months when 200 and 1,000 direct labor hours are used. Assuming jobs similar to A06 were in process at the end of each month, determine the costs assigned to these jobs. (Hint: Determine a variable overhead rate.)

4. Why do you suppose predetermined overhead rates are preferred to actual overhead rates?

I will also attach it just in case it is not showing correctly.

 Subject Mathematics Due By (Pacific Time) 09/05/2015 11:59 pm
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