1. You have been hired by Thompson Waterfall Manufacturing.

Your first task is examine different

distribution methods for applying factory overhead to the various production orders that are
processed during a year.

The following information was taken from the annual budget:

Direct labor hours 80,000

Machine hours 160,000

Manufacturing costs:
Direct labor $400,000
Direct materials 190,000
Indirect labor 65,000
Electric power 46,000
Payroll taxes 12,800
Machine maintenance and repair 10,200
Factory supplies 17,000
Factory heat and light 15,000
Depreciation, taxes, and insurance:
Factory buildings 124,000
Machinery 310,000
$1,190,000

Determine the following factory overhead application rates under each of the following
a. methods:
(1) Direct labor cost
(2) Direct labor hours
(3) Machine hours

b. Prepare a schedule showing the prime cost and total cost of Order 329 with the factory
overhead costs applied on each of the three bases; Job Cost Sheet 329 shows the following:
raw materials, $6,200; direct labor, 6,000 hours and $29,000; machine hours, 2,800.

2. Letterman Corporation has the following data for the current year:

Direct Labor P220,000

Direct Material 137,800
Actual Overhead 320,000
Applied Overhead 395,000
Raw Material 51,394
Work in Process 101,926
Finished Goods 111,192
Cost of Goods Sold 250,182

What is the amount of under- or overapplied overhead? Prepare the necessary journal entry to
dispose of under- or overapplied overhead.
2. Davis Corporation has the following data relating to its power usage for the first six months of the
current year.

Month Usage (Kw)Cost

Jan. 500 P450
Feb. 550 455
Mar. 475 395
Apr. 425 310
May 450 380
June 725 484

Assume usage is within the relevant range of activity.

Required:

a. Using the high-low method, compute the cost formula.

b. Davis Corporation estimates its power usage for July at 660 watts. Compute the total
power cost for July.

3. O'Brien Corporation applies overhead at the rate of 70 percent of direct labor. O'Brien incurred
P450,000 of direct labor during the current year. O'Brien incurred actual overhead of P367,000.

(a) Compute the amount of under- or overapplied overhead for O'Brien Corporation for the
current year
(b) Prepare the necessary journal entry to dispose of the under- or overapplied overhead
(assuming that the amount is immaterial).

5. The facility manager of Price Corporation asked the systems analyst for information to help in
forecasting handling costs. The following printout was generated using the least squares
regression method.

Fixed cost P2,550

Variable cost per unit P 1.85
Activity variable units of production volume

a. Using the information from the printout, develop a cost function that can be used to estimate
handling costs at different volume levels.
b. Estimate handling costs if expected production for next month is 20,000 units.