Plant Capacity
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 121 AND 122. Horngren A manufacturing firm is able to produce 1,000 pairs of shoes per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 800 units per hour. The plant actually operates only 27 days per month.
108. What is the theoretical capacity for the month of April? (E)
a. 1,000,000 units c. 518,400 units
b. 720,000 units d. 240,000 units
109. What is the practical capacity for the month of April? (E)
a. 1,000,000 units c. 518,400 units
b. 720,000 units d. 240,000 units
Budgeted Overhead
17. Machine hours used to set the predetermined overhead rate were 50,000, actual hours were 48,000, and overhead applied was $120,000. Budgeted overhead for the year was
a. $115,200 c. $120,000
b. $118,000 d. $125,000 D, L & H 9e
42. Machine hours used to set the predetermined overhead rate were 80,000, actual hours were 90,000, and overhead applied was $117,000. Budgeted overhead for the year was
a. $104,000 c. $131,625
b. $117,000 d. Some other number. D, L & H 9e
Budgeted Fixed Factory Overhead
34. The predetermined overhead rate (variable and fixed) is $7.50 per machine hour and the denominator activity level is 135,000 machine hours. If the variable portion of the predetermined overhead rate is $3.00 per machine hours, then the budgeted fixed factory overhead for the year is: (M)
a. $30,000. c. $405,000.
b. $607,500. d. $1,012,500. G & N 9e
. ABC Company applies overhead at P8 per direct labor hour of which P3 was variable overhead. Budgeted directed labor hours were 80,000. Budgeted fixed overhead was (E)
A. P200,000 C. P400,000
B. P640,000 D. P240,000 RPCPA 1001
Denominator Hours
77. Nevada Company uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur?
a. 1,150,000 c. 1,200,000
b. 1,190,000 d. 1,210,000 Barfields
110. In connection with a standard cost system being developed by Flint Co., the following
information is being considered with regard to standard hours allowed for output of one unit of product:
Hours Average historical performance for the past 3 years 1.85 Production level to satisfy average consumer demand over a seasonal
time span 1.60
Engineering estimates based on attainable performance 1.50 Engineering estimates based on ideal performance 1.25 To measure controllable production inefficiencies, what is the best basis for Flint to use in establishing standard hours allowed? (E)
a. 1.25 c. 1.60
b. 1.50 d. 1.85 AICPA 1192
Standard Variable Overhead Rate
9. Filter Company’s budget for overhead cost is: total overhead cost = $50,000 + ($4 x direct labor hours). Standard direct labor time is 1.5 hours per unit of product. The standard wage rate is $6 per hour. Standard variable overhead cost for a unit of product is
a. $4.00 c. $9.00
b. $6.00 d. $10.00 D, L & H 9e
18. PALOS Manufacturing Co. has an expected production level of 175,000 product units for 19x7. Fixed factory overhead is P450,000 and the company applies factory overhead on the basis of
expected production level at the rate of P5.20 per unit. The variable overhead cost per unit is (E)
a. P2.57 c. P2.93
b. P2.63 d. P3.02 RPCPA 1097
Standard Overhead Rate
2. If annual overhead costs are expected to be P1,000,000 and 200,000 total labor hours are anticipated (80% direct, 20% indirect), the overhead rate based on direct labor hours is
A. P6.25 C. P25.00
B. P5.00 D. P4.00 Pol Bobadilla
32. At the end of the year, actual manufacturing overhead costs were $110,000 and applied manufacturing overhead costs were $118,800. If the denominator activity for the year was 20,000 machine-hours, and if 22,000 standard machine-hours were allowed for the year's production, the predetermined overhead rate per machine-hour was:
A. $5.00. C. $5.50.
B. $5.94. D. $5.40. G & N 10e
34. Dean Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labor-hours. The company is preparing a flexible budget for next year and the following data are available:
At capacity
Direct labor-hours 60,000
Variable factory overhead $150,000
Fixed factory overhead $240,000
Assume that Dean's denominator activity for the year is set at 80% of capacity. What would be the total predetermined overhead rate, based on direct labor-hours, for the year?
A. $6.00. C. $7.50.
B. $6.50. D. $8.13. G & N 10e
25. ABC Company is preparing a flexible budget for 2004 and the following maximum capacity estimates for the manufacturing division are available:
Direct labor hours 60,000 hours
Variable factory overhead P600,000
Fixed manufacturing overhead P300,000
Assume that ABC’s expected capacity is 80% of maximum capacity. What would be the total factory overhead rate, based on direct labor hours, in a flexible budget at expected capacity?
a. P18.75 C. P16.25
b. P14.25 D. P15.00 Pol Bobadilla
5. Sales Company is preparing a flexible budget for 2004 and the following maximum capacity estimates for Assembly Department are available:
Direct labor hours 80,000 hours
Variable factory overhead P640,000
Fixed manufacturing overhead P300,000
Assume that Sales’ expected capacity is 75% of maximum capacity. What would be the total factory overhead rate, based on direct labor hours, in a flexible budget at expected capacity?
A. P13.00 C. P11.75
B. P15.67 D. P11.00 Pol Bobadilla
35. At the end of the year, a company's Manufacturing Overhead account contained the following data:
Manufacturing Overhead
Actual $82,140 $78,260 Applied
$3,880
If the denominator activity for the year was 40,000 machine-hours, and if 36,400 machine- hours were allowed for the year's production, then the predetermined overhead rate per machine-hour was:
A. $2.15. C. $2.26.
B. $1.96. D. $2.05. G & N 10e
Denominator Hours & Standard Variable Overhead Rate
4. The MPG Reyes Co. owns 6 machines, each of which is run on a 48-hour week basis. Annually, 100 working hours are allotted for each machine for periodic cleansing and greasing. During the year, the company was closed for 250 hours due to a strike triggered by labor- management disputes. With the intervention of the Labor Ministry, the company was able to resume operations. However, it suffered unexpected delays in obtaining the needed raw materials, thus resulting in additional loss of machine hours of 950 . Manufacturing expenses which vary with productive hours totaled P38,600 for the 6 machines.
Assuming that the company normally closes for 3 weeks annually due to slack season, what is the normal number of machine hours worked and how much is the variable expense per working hours? (D)
RPCPA 1086 a. b. c. d.
Normal Number of Machine Hours 13,176 12,312 14,376 13,512 Variable Expense per Working Hour P2.92 P3.14 P2.92 P3.14