• 32.Journal Entry to Apply Overhead. Caspian Company is deciding which of three approaches it should use to apply overhead to products. Information for each approach is provided in the following.

• One plantwide rate. The predetermined overhead rate is 150 percent of direct labor cost.
• Department rates. The Machining department uses a rate of $55 per machine hour, and the Assembly department uses a rate of $35 per direct labor hour.

• Activity-based costing rates. Three activities were identified and rates were calculated for each activity.

  Purchase requisitions	$15 per requisition processed
  Production setup	$50 per setup
  Quality control	$70 per inspection

  Required:

1. Direct labor costs for the year totaled $80,000. Using the plantwide method, calculate the amount of overhead applied to products and make the appropriate journal entry.
2. During the year, the Machining department used 1,000 machine hours, and the Assembly department used 1,200 direct labor hours. Using the department method, calculate the amount of overhead applied to products and make the appropriate journal entry.
3. During the year, 900 purchase requisitions were processed, 1,300 production setups were performed, and 400 products were inspected. Using the activity-based costing approach, calculate the amount of overhead applied to products, and make the appropriate journal entry.

4. Allocating Service Department Costs. Crandall Company has two production departments (P1 and P2) and three service departments (S1, S2, and S3). Service department costs are allocated to production departments using the direct method. The $400,000 costs of department S1 are allocated based on the number of employees in each production department. The $600,000 costs of department S2 are allocated based on the square footage of space occupied by each production department. The $300,000 costs of department S3 are allocated based on hours of computer support used by each production department. Information for each production department follows.

   

   Required:

   1. Calculate the service department costs allocated to each production department.
   2. In general, do U.S. Generally Accepted Accounting Principles allow for the allocation of service department costs to production departments for the purpose of valuing inventory?

22.Calculating Equivalent Units. Complete the requirements for each item in the following.

1. A university has 500 students enrolled in classes. Each student attends school on a part-time basis. On average, each student takes three-quarters of a full load of classes. Calculate the number of full-time equivalent students (i.e., calculate the number of equivalent units).
2. A total of 10,000 units of product remain in the Assembly department at the end of the year. Direct materials are 80 percent complete and direct labor is 40 percent complete. Calculate the equivalent units in the Assembly department for direct materials and direct labor.
3. A local hospital has 60 nurses working on a part-time basis. On average, each nurse works two-thirds of a full load. Calculate the number of full-time equivalent nurses (i.e., calculate the number of equivalent units).
4. A total of 6,000 units of product remain in the Quality Testing department at the end of the year. Direct materials are 75 percent complete and direct labor is 20 percent complete. Calculate the equivalent units in the Quality Testing department for direct materials and direct labor.

25.Assigning Costs to Products: Weighted Average Method. Sydney, Inc., uses the weighted average method for its process costing system. The Assembly department at Sydney, Inc., began April with 6,000 units in work-in-process inventory, all of which were completed and transferred out during April. An additional 8,000 units were started during the month, 3,000 of which were completed and transferred out during April. A total of 5,000 units remained in work-in-process inventory at the end of April and were at varying levels of completion, as shown in the following.

Direct materials	40 percent complete
Direct labor	30 percent complete
Overhead	50 percent complete

The following cost information is for the Assembly department at Sydney, Inc., for the month of April.

Â	Direct Materials	Direct Labor	Overhead	Total
Beginning WIP inventory	$300,000	$350,000	$250,000	$900,000
Incurred during the month	$180,000	$200,000	$170,000	$550,000

Required:

1. Determine the units to be accounted for and units accounted for; then calculate the equivalent units for direct materials, direct labor, and overhead. (Hint: This requires performing step 1 of the four-step process.)
2. Calculate the cost per equivalent unit for direct materials, direct labor, and overhead. (Hint: This requires performing step 2 and step 3 of the four-step process.)
3. Assign costs to units transferred out and to units in ending WIP inventory. (Hint: This requires performing step 4 of the four-step process.)
4. Confirm that total costs to be accounted for (from step 2) equals total costs accounted for (from step 4). Note that minor differences may occur due to rounding the cost per equivalent unit in step 3.
5. Explain the meaning of equivalent units.

20.Identifying Cost Behavior. Vasquez Incorporated is trying to identify the cost behavior of the three costs that follow. Cost information is provided for three months.

Â	Â	Cost A		Cost B		Cost C
Month	Units Produced	Total Costs	Cost per Unit	Total Costs	Cost per Unit	Total Costs	Cost per Unit
1	1,500	$1,500	_____	$4,500	_____	$3,000	_____
2	3,000	1,500	_____	5,250	_____	6,000	_____
3	750	1,500	_____	3,750	_____	1,500	_____

Required:

1. Calculate the cost per unit, and then identify how the cost behaves for each of the three costs (fixed, variable, or mixed). Explain the reasoning for your answers.
2. How does identifying cost behavior patterns help managers?

• 21.Account Analysis. Cordova Company would like to estimate production costs on an annual basis. Costs incurred for direct materials and direct labor are variable costs. The accounting records indicate that the following production costs were incurred last year for 50,000 units.

  Direct materials	$100,000
  Direct labor	$215,000
  Manufacturing overhead	$300,000 (20 percent fixed; 80 percent variable)

  Required:

  Use account analysis to estimate the fixed costs per year, and the variable cost per unit.

• 22.High-Low Method. The city of Rockville reported the following annual cost data for maintenance work performed on its fleet of trucks.

  Reporting Period (Year)	Total Costs	Level of Activity (Miles Driven)
  Year 1	$ 750,000	225,000
  Year 2	850,000	240,000
  Year 3	1,100,000	430,000
  Year 4	1,150,000	454,000
  Year 5	1,250,000	560,000
  Year 6	1,550,000	710,000

  Required:

  1. Use the four steps of the high-low method to estimate total fixed costs per year and the variable cost per mile. State your results in the cost equation form Y = f + vX.
  2. What would the estimated costs be if the trucks drove 500,000 miles in year 7?