FORMULAS
Gross Profit Formula
sales revenue - COGS
If sales revenue for the year was $300,000, COGS was $180,000 and COGM was $176,000. What is companys gross profit?
revenue 300,000 - COGS (180,000) = 120,00 GP
At the beginning of the year, the company estimated the total overhead cost to be $572,000 and expected its direct labor cost to be $440,000. The company uses a traditional costing system and applies overhead costs to jobs based on a percentage of direct labor cost. What is the company's POR based on the percentage of DL cost?
572,000 / 440,000 = 1.3
130% DL cost
Under vs overapplied
explain definition, if its debit or credit and journal entries
underapplied - > applied is less than actual, debit, Dr. COGS and Cr. MOH
overapplied -> applied is more than actual, credit, Dr. MOH and Cr. COGS
Purchasing raw materials
Dr. Raw Materials
Cr. cash or accounts payable
total manufacturing cost (TMC) formula
DM used + DL + MOH = TMC
Calculate MOH if raw materials are $8000, factory utilities are $10,000, WIP is $15,000, indirect materials are $6000, indirect labor is $9000, and direct labor is $42,000
8000 + 10,000 + 6000 + 9000 = 33,000 MOH
DM and DL are not MOH
How much overhead (MOH) should be applied to jobs 101 and 102? If the POR is 1.3, job 101 had (DM 6500, DL 2100) and job 102 had (DM 8500, DL 6200)
Job 101 1.3 POR x $2100 = 2730
JOB 102 1.3 POR x 6200 = 8060
POR
predetermined overhead rate formula
(estimated annual MOH costs) / (estimated activity base usage)
completion of a job
Dr. Finished goods
Cr. WIP
cost of goods (COGS) formula
Beginning FG + COGM = COG available for sale - ending FG = COGS
calculate COGS if BEG. FG inv is $10,000, COGM is $160,000, and end FG inv. is $49,500
10,000 + 160,000 = 170,000 COGAFS
170,000 - 49,500 = 120,500 COGS
What is the journal entry to apply or assign manufacturing overhead cost to JOB 101 based on previous answer
Job 101 = $2730
Dr. WIP inventory 2730
Cr. MOH 2730
How to find activity based overhead rate
estimated overhead per activity / estimated use of cost drivers per activity
Assigning raw materials
Dr. WIP, Dr. MOH, Cr. Raw materials
Cost of goods manufactured (COGM) formula
Beginning WIP + TMC = total wip - ending WIP = COGM
Calculate cost of goods manufactured if Beg WIP inv is $30,000, DM used is $52,000, direct labor is $60,000, MOH applied is $90,000, and ending WIP inv is $72,000
30,000 + 52,000 + 60,000 + 90,000 = 232,000 total WIP
232,000 - 72,000 = 160,000
At the end of year, Miller inc. needs to analyze overhead costs to determine if it's under/over
If the company incurred $584,300 in actual overhead costs and applied $585,600 to jobs during the year, was the overhead over- or under-applied for the year, and by how much?
What is the journal entry to correct overhead?
Applied (585,600) - actual (584,300) = 1300 over applied
JE --> Dr. MOH 1300 and Cr. COGS 1300
Calculate POR AND amount of overhead that should be applied.
INC. expects annual overhead costs to be $375,000, total DL costs for the year to be $125,000 and 15,600 direct labor hours. Actual direct labor costs are $20,000 and hours are 12,000
POR = 375,000/125,000 = $3 per direct labor
MOH applied = $3 x 20,000 = 60,000
Assigning Factory Labor
Dr. WIP, Dr. MOH, Cr. factory labor
Direct materials (DM) used formula
Beginning RM + RM purchases = RM available - ending RM = DM used
Calculate DM used if BEG RM is $7000, RM purchased is $60,000, end RM is $15,000 and direct labor us $60,000
7000 + 60,000 = 67,000 RM avaiable
67,000 - (15,000) = 52,000 DM used
During the period, the company assigned 12,000 in DM cost and 6000 in DL cost to a job. They also issued IM of 2400 and charged indirect labor of 2200. MOH applied is $7200. Prepare JE for material, labor, and overhead
JE 4 to record materials (Dr. WIP 12,000, Dr. MOH 2400, Cr. RM inv 14,400)
JE 5 to record labor (Dr. WIP 6000, Dr. MOH 2,200 and Cr. Factory labor 8,200
JE 6 to record MOH (Dr. WIP 7200, Cr. MOH 7200
Find the activity based overhead rate for the following 4 activity cost pools
activity cost pool, estimated overhead, cost driver = POR
manufacturing --> $700,000, 50,000 machine hours
machine setups --> $100,00, 2,000 set ups
purchase ordering --> $50,000, 2500 purchase orders
factory maintenance --> $50,000, 25,000 square ft
Activity-based overhead rates
manufacturing = $14 per machine hour
machine setups = $50 per set up
Purchase ordering = $20 per order
factory maintenance = $2 per square foot
Sale of a Job
Dr. A/R and Cr. sales revenue
Dr. COGS and Cr. FG inv.