Questions by ocrist - Page 6
Primera Company produces two products and uses a predetermined overhead rate to apply overhead. Primera currently applies overhead using a plantwide rate based on direct labor hours. Consideration is being given to the use of departmental overhead rates where overhead would be applied on the basis of direct labor hours in Department 1 and on the basis of machine hours in Department 2. At the beginning of the year, the following estimates are provided:Department 1 Department 2Direct labor hours 640,000 128,000Machine hours 16,000 192,000Overhead cost $384,000 $1,152,000Actual results reported by department and product during the year are as follows:Department 1 Department 2Direct labor hours 627,200 134,400Machine hours 17,600 204,800Overhead cost $400,000 $1,232,000Product 1 Product 2Direct labor hours:Department 1 480,000 147,200Department 2 96,000 38,400Machine hours:Department 1 8,000 9,600Department 2 24,800 180,000Required:1. Compute the plantwide predetermined overhead rate and calculate the overhead assigned toeach product.2. Calculate the predetermined departmental overhead rates and calculate the overheadassigned to each product.3. Using departmental rates, compute the applied overhead for the year. What is the under- oroverapplied overhead for thefirm?4. Prepare the journal entry that disposes of the overhead variance calculated in Requirement3, assuming it is not material in amount. What additional information would you need ifthe variance is material to make the appropriate journal entry?
Steinberg Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Steinberg expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows: Regular Model Deluxe Model TotalSales $13,500,000 $12,150,000 $25,650,000Less: Variable costs 9,000,000 7,290,000 16,290,000Contribution margin $4,500,000 $4,860,000 $9,360,000Less: Direct fixed costs 1,200,000 960,000 2,160,000Segment margin $3,300,000 $3,900,000 $7,200,000Less: Common fixed costs 1,280,000Operating income $5,920,000Required:1. Compute the number of regular models and deluxe models that must be sold to break even.2. Using information only from the total column of the income statement, compute the sales revenue that must be generated for the company to break even.