Student Name:

Class:
Problem 2-05

CHRISTOPHER'S CUSTOM CABINET COMPANY

Requirement 1:

Raw Materials Inventory Work in Process Inventory Finished Goods Inventory

1/1 20,000 1/1 15,000 1/1 32,000

20,000 15,000 32,000

Try again! Try again! Try again!

Selling and
Cost of Goods Sold Manufacturing Overhead Administrative Expenses

- - -
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Sales Revenue

-
Try again!

Requirement 2:
Unadjusted gross profit $ -
Try again!
Requirement 3:
Manufacturing overhead $ - Overapplied
Try again! Correct!
Requirement 4:
Adjusted Gross Profit $ -
Try again!
Given Data PA2-05:

CHRISTOPHER'S CUSTOM CABINET COMPANY

 Student Name:
Class:
Problem 2-07

AMBERJACK COMPANY

Requirement 1:
a. Predetermined overhead rate $ 36.00 <--Correct!
b. Applied manufacturing overhead $ 648,000 <--Correct!
c. Underapplied $ 7,000 <--Correct!

Requirement 2:
a. Predetermined overhead rate 150% <--Correct!
b. Applied manufacturing overhead $ 675,000 <--Correct!
c. Overapplied $ 20,000 <--Correct!

Requirement 3:
a. Predetermined overhead rate $ 79.20 <--Correct!
b. Applied manufacturing overhead $ 673,200 <--Correct!
c. Overapplied $ 18,200 <--Correct!

Requirement 4:
Based on last year's data, machine hours was the most accurate allocation base for
applying manufacturing overhead, because it results in the lowest amount of over or
underapplied manufacturing overhead, or the smallest difference between actual and
applied manufacturing overhead cost.

Requirement 5:
Ideally, companies should choose an allocation base that has a cause and effect
relationship with the incurrence of manufacturing overhead cost. In addition, the
allocation measure must be something that can be reasonably measured for each
individual unit or job, and the benefits must outweigh cost of measurement. This is one
reason that many companies choose to use direct labor hours to apply manufacturing
overhead to production. This measure is already captured in the accounting system and
often has a direct relationship with the incurrence of manufacturing overhead cost.
However, with advances in automation and the changing nature of the labor force, direct
labor hours is not necessarily the best measure for applying manufacturing overhead to
production.
Given Data PA2-07:

AMBERJACK COMPANY