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 Topic: Please help me on this BEC problem ( Topic Closed)
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berry0331
Newbie
Joined: 04 Sep 2011
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Posts: 49
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| Posted: 01 Nov 2011 at 22:47 | IP Logged
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Hi everyone,
I've been studying BEC on Becker and I came across the following
problem:
Mason Company uses a job-order cost system and applies manufacturing
overhead to jobs using predetermined overhead rate based on direct-
labor dollars. The rate for the current year is 200 percent of direct-labor
dollars. This rate was calculated last December and will be used
throughout the current year. Mason had one job, No. 150, in process on
August 1 with raw materials costs of $2,000 and direct-labor costs of
$3,000. During August, raw materials and direct labor added to jobs were
as follows:
Raw materials
No. 150 $ --
No. 151 $4,000
No. 152 $1,000
Direct labor
No. 150 $1,500
No. 151 $5,000
No. 152 $2,500
Actual manufacturing overhead for the month of August was $20,000.
During the month, Mason completed Job Nos. 150 and 151. For August,
manufacturing overhead was:
a. Overapplied by $4,000
b. Underapplied by $7,000
c. Underapplied by $2,000
d. Underapplied by $1,000
The correct answer is C. I know how to get $2,000, but I am wondering
about this piece of information which read "Mason had one job, No. 150,
in process on August 1 with raw materials costs of $2,000 and direct-
labor costs of $3,000." Why is it that the information wasn't used to
getting the answer for underapplied by $2,000? This kind of confuses me.
So what information this is for?
I'd be greatly appreciated for anyone's help.
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CPA#1
Major Contributor
Joined: 01 Dec 2009
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Posts: 439
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| Posted: 02 Nov 2011 at 12:32 | IP Logged
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It's there to confuse you. That's what the CPA exam is all about and that's why we struggle to pass this.
What you're reading is, "Mason had one job, No. 150, in process on
August 1 with raw materials costs of $2,000 and direct-labor costs of
$3,000."
The question is asking for the applied overhead DURING August. They're giving you that August 1 info so you know the DM, DL, and OH for the BEGINNING of August, not during. Those are just the costs in the beginning of the month. These costs were never applied during the month of August.
Think about it.... I bought 5 candy bars in January. I never ate any. In February 1, I still had 5 candy bars because I didn't eat them yet. On February 15, I bought 3 candy bars. How many candy bars did I buy in February?? It won't be 8. It will only be 3 because I only bought 3 during February. The other 5 were bought during a previous month.
The same can be said about this question. The raw materials costs of $2,000 and direct-labor costs of
$3,000 were costs in the beginning of the month (August 1), but they never occurred during the month of August. They were costs from a previous month and should NOT be used in your calculation of Applied OH during the month of August.
Hope this clarifies things!
Good luck!
__________________
FAR: 52,66,73,61,89
AUD: 47,87
BEC: 80
REG: 64,74,84
DONE!!!!!!!
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berry0331
Newbie
Joined: 04 Sep 2011
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Posts: 49
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| Posted: 02 Nov 2011 at 22:49 | IP Logged
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I got it. Thank you for your help! :)
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