Podcast
Questions and Answers
What is used as a cost-allocation base for applying overhead in machining at Enriquez Machine Parts Company?
What is used as a cost-allocation base for applying overhead in machining at Enriquez Machine Parts Company?
- Machine parts
- Direct labor
- Machine hours (correct)
- Assembly
Which of the following best describes budgeted overhead application rates?
Which of the following best describes budgeted overhead application rates?
- Estimated rates (correct)
- Fixed costs only
- Actual costs incurred
- Variable costs only
How is total overhead applied to a particular product calculated at Enriquez Machine Parts Company?
How is total overhead applied to a particular product calculated at Enriquez Machine Parts Company?
- Budgeted machine hours multiplied by actual labor costs
- Actual direct labor cost multiplied by fixed overhead rate
- Fixed overhead rate multiplied by total machine hours
- Actual machine hours multiplied by budgeted rates (correct)
What would be the overhead applied to a product using 8 machine hours in machining?
What would be the overhead applied to a product using 8 machine hours in machining?
What cost-allocation base is used for applying overhead in assembly at Enriquez Machine Parts Company?
What cost-allocation base is used for applying overhead in assembly at Enriquez Machine Parts Company?
Which of the following statements about budgeted overhead application rates is true?
Which of the following statements about budgeted overhead application rates is true?
What is used to apply overhead based on actual events?
What is used to apply overhead based on actual events?
In Enriquez Machine Parts Company, what is the single cost-allocation base in the machining department?
In Enriquez Machine Parts Company, what is the single cost-allocation base in the machining department?
How is total overhead applied to a product calculated?
How is total overhead applied to a product calculated?
If Enriquez had used 70,000 machine hours in Machining, how much overhead was applied to Machining?
If Enriquez had used 70,000 machine hours in Machining, how much overhead was applied to Machining?
In Enriquez's Assembly department, how much overhead was applied if $190,000 was incurred in direct labor cost?
In Enriquez's Assembly department, how much overhead was applied if $190,000 was incurred in direct labor cost?
What is the basis for selecting a cost-allocation method in Enriquez Machine Parts Company?
What is the basis for selecting a cost-allocation method in Enriquez Machine Parts Company?
What are budgeted overhead application rates?
What are budgeted overhead application rates?
In the context of overhead application, what does 'budgeted overhead application rate' represent?
In the context of overhead application, what does 'budgeted overhead application rate' represent?
How is total overhead applied to a specific product calculated?
How is total overhead applied to a specific product calculated?
What is the purpose of selecting a single cost allocation base in each department for applying overhead?
What is the purpose of selecting a single cost allocation base in each department for applying overhead?
Why are budgeted overhead rates used in overhead application?
Why are budgeted overhead rates used in overhead application?
How would you calculate the total overhead applied to a product that uses 5 machine hours and incurs a direct-labor cost of $40?
How would you calculate the total overhead applied to a product that uses 5 machine hours and incurs a direct-labor cost of $40?
What are budgeted overhead rates used for in a company?
What are budgeted overhead rates used for in a company?
In the context of Enriquez Machine Parts Company, how is overhead applied to a product?
In the context of Enriquez Machine Parts Company, how is overhead applied to a product?
For a product using 8 machine hours in machining and incurring a direct labor cost of $60, how much overhead would be applied?
For a product using 8 machine hours in machining and incurring a direct labor cost of $60, how much overhead would be applied?
If Enriquez Machine Parts Company used 50,000 machine hours in machining, how much overhead would be applied to Machining?
If Enriquez Machine Parts Company used 50,000 machine hours in machining, how much overhead would be applied to Machining?
What is the key factor used for applying overhead in the assembly department of Enriquez Machine Parts Company?
What is the key factor used for applying overhead in the assembly department of Enriquez Machine Parts Company?
Suppose Enriquez had incurred $150,000 in direct labor cost. How much overhead would be applied to Assembly?
Suppose Enriquez had incurred $150,000 in direct labor cost. How much overhead would be applied to Assembly?
What method does Enriquez Machine Parts Company use to allocate overhead in the machining department?
What method does Enriquez Machine Parts Company use to allocate overhead in the machining department?
In the given scenario, how is total overhead applied to a product calculated?
In the given scenario, how is total overhead applied to a product calculated?
What is the total overhead applied to a product that uses 8 machine hours in machining and incurs direct-labor cost of $60 in assembly?
What is the total overhead applied to a product that uses 8 machine hours in machining and incurs direct-labor cost of $60 in assembly?
If Enriquez had used 50,000 machine hours in Machining at the end of the year, how much overhead was applied to Machining?
If Enriquez had used 50,000 machine hours in Machining at the end of the year, how much overhead was applied to Machining?
How much overhead was applied to Assembly if Enriquez incurred $150,000 in direct labor cost at the end of the year?
How much overhead was applied to Assembly if Enriquez incurred $150,000 in direct labor cost at the end of the year?
What is the basis for applying overhead in the assembly department at Enriquez Machine Parts Company?
What is the basis for applying overhead in the assembly department at Enriquez Machine Parts Company?
Flashcards
Cost-allocation base (Machining)
Cost-allocation base (Machining)
The factor used to assign overhead costs to products in the machining department. In Enriquez Machine Parts Company, it's machine hours.
Budgeted overhead application rates
Budgeted overhead application rates
Estimated rates used to apply overhead costs to products. They are based on anticipated costs, not actual costs.
Overhead application (Machining)
Overhead application (Machining)
Calculating the overhead cost assigned to a specific product in the machining department by multiplying actual machine hours by budgeted overhead rates.
Overhead applied (Machining example)
Overhead applied (Machining example)
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Cost-allocation base (Assembly)
Cost-allocation base (Assembly)
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Budgeted Overhead Rate
Budgeted Overhead Rate
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Overhead application (Assembly example)
Overhead application (Assembly example)
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Overhead Application (calculation method)
Overhead Application (calculation method)
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Overhead applied to machining
Overhead applied to machining
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Overhead applied to machining (given example)
Overhead applied to machining (given example)
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Overhead applied to assembly (given example)
Overhead applied to assembly (given example)
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Cost Allocation Method Selection
Cost Allocation Method Selection
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Budgeted overhead application rate value
Budgeted overhead application rate value
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Overhead Application Calculation (Complete)
Overhead Application Calculation (Complete)
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Single Cost-Allocation Base Purpose
Single Cost-Allocation Base Purpose
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Use of Budgeted Overhead Rates
Use of Budgeted Overhead Rates
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Calculating Overhead Applied (multi-factor)
Calculating Overhead Applied (multi-factor)
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Study Notes
Budgeted Overhead Application Rates
- Overhead rates are budgeted, meaning they are estimates used to apply overhead based on actual events.
- Budgeted overhead application rate = Total budgeted Factory overhead / Total budgeted Amount of cost driver.
Illustration of Overhead Application
- Enriquez Machine Parts Company uses a single cost-allocation method in each department for applying overhead.
- In machining, the cost-allocation method is machine hours (MH).
- In assembly, the cost-allocation method is direct-labor cost (LC).
- Total overhead applied to a product = Budgeted overhead rates x Actual machine hours (MH) or labor cost (LC) used by that product.
- Example: Apply $44 of overhead to a product that uses 6 MH in machining and incurs direct-labor cost of $40 in assembly.
- Machining: 6 actual MH x $4 per MH = $24
- Assembly: $40 of DL cost x 50% = $20
- Total overhead = $24 + $20 = $44
Application of Overhead to Departments
- If Enriquez had used 70,000 machine hours in Machining, overhead applied to Machining = 70,000 MH x $4 per MH = $280,000.
- If Enriquez had incurred $190,000 in direct labor cost, overhead applied to Assembly = $190,000 x 50% = $95,000.
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