Open in App
Log In Start studying!
Open in App Log out

Chapter 15: Q1DQ (page 694)

Question: Why must a company estimate the amount of factory overhead assigned to individual jobs or job lots?

Short Answer

Expert verified

Answer

Estimating the relation between factory overhead cost and job or job lot is necessary to assign costs.

Step by step solution

01

Meaning of Factory Overhead

Factory overhead is the portion of a business' operating expenses that aren't directly related to a particular product or service. Overhead is typically connected to manufacturing or production.

02

Explaining why must a company estimate the amount of factory overhead assigned to individual jobs or job lots

Manufacturing overhead isn't connected to specific units (jobs) or bunches (job lots). Estimates of the relationship between manufacturing overhead cost and work or job lot are required to relegate expenses. Also, since work order cost accounting can be a perpetual framework, we must calculate (permanent) stock costs by estimating a predetermined overhead rate. Also, utilizing this anticipated completeness facilitates quick estimation of work arrangement companies.

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

An advertising agency is estimating costs for advertising a music festival. The job will require 200 direct labor hours at a cost of \(50 per hour. Overhead costs are applied at a rate of \)65 per direct labor hour. What is the total estimated cost for this job?

In December 2016, Custom Mfg. established its predetermined overhead rate for jobs produced during 2017 by using the following cost predictions: overhead costs, \(750,000, and direct materials costs, \)625,000. At year-end 2017, the company’s records show that actual overhead costs for the year are \(830,000. Actual direct materials cost had been assigned to jobs as follows.

Jobs completed and sold

\)513,750

Jobs in finished goods inventory

102,750

Jobs in work in process inventory

68,500

Total actual direct materials cost

$685,000


  1. Determine the predetermined overhead rate, using predicted direct materials costs, for 2017.

A production department’s beginning inventory cost includes \(394,900 of conversion costs. This department incurs an additional \)907,500 in conversion costs in the month of March. Equivalent units of production for conversion total 740,000 for March. Calculate the cost per equivalent unit of conversion using the weighted-average method.

Moonrise Bakery applies factory overhead based on direct labor costs. The company incurred the following costs during 2017: direct materials costs, \(650,000; direct labor costs, \)3,000,000; and factory overhead costs applied, \(1,800,000.

1. Determine the company’s predetermined overhead rate for 2017.

2. Assuming that the company’s \)71,000 ending Work in Process Inventory account for 2017 had \(20,000 of direct labor costs, determine the inventory’s direct materials costs.

3. Assuming that the company’s \)490,000 ending Finished Goods Inventory account for 2017 had $250,000 of direct materials costs, determine the inventory’s direct labor costs and its overhead costs.

Refer to the information in QS 16-10. Prepare the November 30 journal entry to record the transfer of units (and costs) from the assembly department to the painting department. Use the weighted-average method.
See all solutions

Recommended explanations on Business Studies Textbooks

Business Operations

Read Explanation

Strategic Direction

Read Explanation

Corporate Finance

Read Explanation

Business Case Studies

Read Explanation

Nature of Business

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free