Question : 26) Isabelle, Inc., uses a budgeted factory overhead rate to : 1217183

26) Isabelle, Inc., uses a budgeted factory overhead rate to apply overhead to production. The following data are available for the year ended December 31, 20X5.

BudgetedActual

Factory overhead              $675,000              $716,000

Direct labor costs              $450,000              $432,000

Direct labor-hours              12,500dlh              13,325dlh

Required:

a.Determine the budgeted factory overhead rate based on direct labor-hours.

b.What is the applied overhead based on direct labor-hours?

c.Is overhead overapplied or underapplied? Explain.

27) Schulz Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of under/overapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:

Direct materials              $ 60,000

WIP              190,000

Finished goods              250,000

Total              $500,000

Required:

a.Determine the budgeted factory overhead rate per machine-hour.

b.Compute the over/underapplied overhead.

c.Prepare the journal entry to dispose of the variance using the write-off to cost of goods sold approach.

d.Prepare the journal entry to dispose of the variance using the proration approach.

28) Sedgwick County Hospital uses an indirect job-costing system for all patients. In June, the budgeted nursing care charges for each department and budgeted allocation bases of nursing days are as follows:

                 June                               Critical CareSpecial CareGeneral Care

Budgeted nursing costs              $2,480,000              $1,644,000              $1,280,400

Budgeted nursing days              5,000              4,000              8,000

Patient Ms. Graves spent six days in critical care and eight days in special care during June. The remainder of the 30-day month was spent in the general care area.

Required:

a.Determine the budgeted overhead rate for each department.

b.What are the total charges to Ms. Graves if she was in the facility the entire month?

29) Hammond and Jarrett provide tax consulting for estates and trusts. Their job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (research support). The indirect-cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labor-hours.

Required:

a.Discuss the reasons a consulting firm might use a normal costing system rather than an actual costing system.

b.What might be some reasons for the firm to change from a one-pool to a multiple-pool allocation concept?

Objective 4.8

1) In the service sector:

A) direct labor costs are always easy to trace to jobs

B) a budgeted direct-labor cost rate may be used to apply direct labor to jobs

C) normal costing may not be used

D) overhead is generally applied using an actual cost-allocation rate

2) In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use:

A) budgeted rates for all direct costs

B) budgeted rates for indirect costs

C) actual costing

D) budgeted rates for some direct costs and indirect costs

3) Luke employs 25 professional cleaners. Budgeted costs total $1,800,000 of which $1,050,000 is direct costs. Budgeted indirect costs are $750,000 and actual indirect costs were $793,800. Budgeted professional labor-hours are 1,000,000 and actual hours were 1,008,000. What is the budgeted direct cost-allocation rate?

A) $1.80 per hour

B) $1.7857 per hour

C) $0.75 per hour

D) $1.05 per hour

4) The budgeted direct-labor cost rate includes ________ in the calculation.

A) budgeted total costs in indirect cost pool

B) budgeted total direct-labor costs in the denominator

C) budgeted total direct-labor costs in the numerator

D) budgeted total direct-labor hours in the numerator

5) The law firm of Smith & Jones has a staff of 30 lawyers and administrative staff. Budgeted total costs of the firm total $4,000,000 of which $2,500,000 is direct-labor costs.  Assuming that the remaining costs are indirect and direct-labor cost is the allocation base, calculate the budgeted indirect cost rate.

A) 38 of direct-labor cost

B) 60% of direct-labor cost

C) 63% of direct-labor cost

D) 160% of direct-labor cost