13. LO.1 (Predetermined OH rate) For 2010, Omaha Mechanical has a monthly overhead cost formula of $42,900 + $6 per direct labor hour. The firm’s 2010 expected annual capacity is 78,000 direct labor hours, to be incurred evenly each month. Making one unit of the company’s product requires 1.5 direct labor hours. a. Determine the total overhead to be applied per unit of product in 2010. b. Prepare journal entries to record the application of overhead to Work in Process Inventory and the incurrence of $128,550 of actual overhead in January 2010, when 6,390 direct labor hours were worked. c. Given the actual direct labor hours in part (b), how many units would you have expected to be produced in January? 14. LO.1 (Predetermined OH rate) Langston Automotive Accessories applies overhead using a combined rate for fixed and variable overhead. Th e rate is 250 percent of direct labor cost. During the first three months of the current year, actual costs incurred were as follows: Direct Labor Cost Actual Overhead January $180,000 $440,000 February 165,000 420,400 March 170,000 421,000 a. What amount of overhead was applied to production in each of the three months? b. What was the under applied or over applied overhead for each of the three months and for the first quarter? 16. LO.2 (Under applied or over applied overhead) At the end of 2010, Jackson Tank Company’s accounts showed a $66,000 credit balance in Manufacturing Overhead Control. In addition, the company had the following account balances: Work in Process Inventory $384,000 Finished Goods Inventory 96,000 Cost of Goods Sold 720,000 a. Prepare the necessary journal entry to close the overhead account if the balance is considered immaterial. b. Prepare the necessary journal entry to close the overhead account if the balance is considered material. c. Which method do you believe is more appropriate for the company and why? 21. LO.4 (High–low method) Information about Indiana Industrial’s utility cost for the last six months of 2010 follows. The high–low method will be used to develop a cost formula to predict 2011 utility charges, and the number of machine hours has been found to be an appropriate cost driver. Data for the first half of 2010 are not being considered because the utility company imposed a significant rate change as of July 1, 2010. Month Machine Hours Utility Cost July 33,750 $13,000 August 34,000 12,200 September 33,150 11,040 October 32,000 11,960 November 31,250 11,500 December 31,000 11,720 a. What is the cost formula for utility expense? b. What is the budgeted utility cost for September 2011 if 31,250 machine hours are projected?
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