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Question#1. Whitley, Inc. uses ABC for allocating MOH. They have identified thre

ID: 2547504 • Letter: Q

Question

Question#1.

Whitley, Inc. uses ABC for allocating MOH. They have identified three activities.

One batch of cookies takes:

2 direct labor hours

1 machine hour

10 boxes (box size is 9X6X2)

How much manufacturing overhead should be charged to the batch of cookies?

Question #2.

Lou Marinaro worked 44 hours last week on the assembly line for Breakbad Manufacturing doing the following:

Monday - 3 hours on the line; 5 hours idle due to equipment malfunction

Tuesday - 8 hours on the line

Wednesday - 8 hours on the line

Thursday - 12 hours on the line (4 of the hours are considered overtime)

Friday - 8 hours on the line.

He worked the overtime on Thursday to help the company catch up on production. They were behind because of Monday's equipment malfunction.

Marinaro makes $40 per hour and is paid $60 an hour for overtime. How much of his compenstion should be debited to MOH?

Activity Activity Measure Activity Rate Mixing Direct labor hours $15 per DLH Baking Machine hours $10 per MH Packaging Box size $.05 per cubic inch

Explanation / Answer

Answer to Question 1:

Manufacturing Overhead for 1 Batch of cookies:

Mixing cost : $ 15 per DLH : $ 15 x 2 DLH = $ 30

Baking Cost: $ 10 per MH: $ 10 x 1 MH = $ 10

Packaging Cost: $ 0.05 per cubic inch: $ 0.05 x 108 cubic inches x 10 boxes = $ 54

Total Manufacturing OH = $ 94

Answer to Question 2:

Normal hours of work = 3 hrs + 8 hrs x 4 days = 35 hours

Overtime = 4 hours.

Normal wages = 35 hours x $ 40 = $ 1,400

Overtime wages = 4 hours x $ 60 = $ 240

Total compensation of Lou Marinaro which should be debited to MOH is $ 1,640.

Hope this is helpful.

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