Problem -

Part I. Given the following information, prepare a cost of production report for Department B for July.

John stone Chemicals manufacture its products in two departments [A and B]. Data for Department B is listed below:

Units transferred from Department A 40,000

Per unit cost $3.20

Units transferred to finished goods 26,000

Units still in process [1/3 complete] 6000

Costs added by Department B:

Labor $31,500

Factory overhead $23,100

All lost units are considered to be normal.

Part II. Determine the factory overhead rates. Round money to the nearest cent and rates to the nearest percent. Label your answers.

The XYZ Co. estimates its factory overhead for the year to be $58,000. They further estimate they will produce 38,000 units at a material cost of $48,000. Production will require 20,000 direct labor hours at an estimated cost of $100,000. Machines will work 1500 hours.

Find the following predetermined rates:

• material cost
• per unit cost
• machine hour cost
• direct labor cost
• direct labor hour cost

Part III. Answer the following questions.

1. What is the purpose of equivalent units? How do they differ from good units?

2. Explain the use of a quantity schedule. Who gives us the information regarding the percentage of units completed in a department?

3. How do applied factory overhead rates differ from applied factory overhead itself?