Ortega Manufacturing Company produced 600 units of inventory in January 2014. Th

ID: 2425190 • Letter: O

Question

Ortega Manufacturing Company produced 600 units of inventory in January 2014. The company expects to produce an additional 6,400 units of inventory during the remaining 11 months of the year, for a total estimated production of 7,000 units in 2014. Direct materials and direct turning overhead cost during the accounting period.

Indirect materials $5,000

Depreciation on equipment $24,000

Utilities cost $10,000

Salaries of plant manager and staff $96,000

Rental fee on manufacturing facilities $19,000

Combine the individual overhead cost into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units.

Determine the estimated cost of 600 units of product made in January.

Is the cost computed in requirements a actual or estimated? Could Ortega improve accuracy by waiting until December to determine the cost of products? Identify two reasons that a manager would want to know the cost of products in January. Discuss the relationship between accuracy and relevance as it pertains to this problem.

4-11B Latimer Manufacturing Company expects to make 72,000 travel sewing kits during 20015. In January the company made 1800 kits. Materials and labor cost for January were 7200 and 9000, respectively. In February, Latimer produced 2200 kits. Materials and labor cost for February were 8800 and 11,000 respectively. The company paid $144,000 for annual factory insurance on January 10, 2015. Ignore other manufacturing overhead cost.

Assuming that Latimer desires to sell all sewing kits for cost plus 20% of cost, what price should be charged for the kits produced in January and February?

4-12B Quigley Food Corporation makes two products from soybeans: cooking oil and cattle feed. From a standard batch of 100,000 pounds of soybeans. Quigley produces 20,000 pounds of cooking oil and 80,000 pounds of cattle feed. Producing a standard batch cost $27,000. The sales prices per pound are $3,000 for cooking oil and $1.50 for cattle feed.

Allocate the joint product cost to the two products using weight as the allocation base.

Allocate the joint product cost to the two products using market value as the allocation base.

5. Soochaw Company makes three models of jump drives in its factory: J512, J1G, and J4G. The expected overhead cost for the next fiscal year are as follows:

Payroll for factory managers $120,000

Factory maintenance cost $60,000

Factory insurance $30,000

Total overhead cost $210,000

Soochaw uses labor hours as the cost driver to allocate overhead cost. Budget labor hours for the products are as follows:

J512 1,600 hours

J1G 750 hours

J4G 650 hours

Total labor hours 3,000

Allocate the budget overhead cost to the products.

Provide a possible explanation as to why Soochaw chose labor hours instead of machine hours, as the allocation base.

Explanation / Answer

Ortega 15,400/7,000 = $22 pser unit

Estiamted cost 600*22 = $13,200

It is not actual cost it is estimated cost

For Jan 28,200@120% = $33,840 /1800 = $18.80

For Feb 31,800 @10% = 38,160/2,200 = $17.35

4-12B Weight

27,000/100,000*20,000 = 5,400 Quigley

27,000/100,000* 80,000 = 21,600 to Cattle feed

Market value

27,000/501*500 = $26,946

23,000/501*1 = 54

Last 210,000/30,000 = $70

J5 12 1600*70 = $112,000

J1G 750*70 = $52,500

J4g 650*70 = $45,500

Since prodcution is labor based