: Q1: Medusa Products uses a Job-order costing system. Overhead costs applied to jobs on the basis…

| October 22, 2018

Q1: Medusa Products uses a Job-order costing system. Overhead costs applied to jobs on the basis ofmachine hours, at the beginning of the year, management estimated that 85,000 machine-hours wouldbe required for the period’s estimated level of production. The company also estimated $106,250 offixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of$0.75 per machine hour.Required:1. Compute the company’s predermined overhead rate.2. Assume that during the year the company actually works only 80,000 machine-hours and incursthe following costs in the manufacturing overhead and work in process accounts:Manufactiring Work inOverhead Process(Utitlites) 14,000 ? (Direct material) 530,000(Insurance) 9,000 (Direct labor) 85,000(Maintainance) 33,000 (Overhead) ?(Indirect materials) 7,000(Indirect labor) 65,000(Depreciation) 40,000Copy the data in the T-accounts above onto your answer and coumpute the amount of theoverhead cost that would be applied to Work in Process for the year, and make the entry in yourT-accounts.3. Compute the amount of underapplied or overapplied overhead for the year, and show thebalance in your Manufacturing overhead T-account. Prepeare a journal entry to close out thebalance in this account to cost of goods sold.4. Explain why the manufacturing overhead was underapplied or overapplied for the year.Q3: Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for $60 per unit and has a CM ratio of 40%. The company’s fixed expenses are $360,000 per year. The company plans to sell 17,000 bookbags this year.Required:1. What are the variable expenses per unit?2. Using the equation method:a. What is the break-even point in the units and in sales dollars?b. What sales level in units and in sales dollars in required to earn an annual profit of $90,000?c. Assume that through negotiation with the manufacturer the Super Sales Company is able to reduce its variable expenses be $3 per unit. What is the company’s new break-even point in units and in sales dollar?3. Repeat (2) above using the formula method.

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