Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:Total machine-hours 30,400Total fixed manufacturing overhead cost $425,600Variable manufacturing overhead per machine-hour $5Recently, Job T687 was completed with the following characteristics:Number of units in the job 10Total machine-hours 20Direct materials $590Direct labor cost $1,180The unit product cost for is closest to:a. $415b. $218c. $118d. $109


Answer 1




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Alton Company produces metal belts. During the current month, the company incurred the following product costs: Raw materials $100,000; Direct labor $75,000; Electricity used in the Factory $25,000; Factory foreperson salary $3,750; and Maintenance of factory machinery $2,000. Alton Company's indirect product costs totaled:



Total indirect product costs                        $30,750


The indirect product costs refer to all the costs that are associated with the manufacturing overheads and can be calculated as follows:

Electricity used in the Factory                   $25,000

Factory foreperson salary                          $3,750

Maintenance of factory machinery            $2,000

Total indirect product costs                        $30,750

Heller Enterprises reports the following information. 2017 2016 Cash $10,800 $10,600 Operating assets $18,500 $18,800 Operating liabilities $14,100 $14,800 Net operating profit after tax $10,200 $10,300 Weighted average cost of capital 6.0% 6.0% What is the company's residual operating income (ROPI) for 2017? A. $9,072 B. $6,200 C. $9,312 D. $9,960 E. None of the above



The company's residual operating income (ROPI) for 2017 is $9,960. The right answer is D.


In order to calculate the company's residual operating income (ROPI) for 2017 we would have to use the following formula:

Company's Residual operating Income = NOPAT - [ WACC x NOA at beginning ]

Where, NOPAT = Net operating profit after tax for 2017 = $10,200, WACC = weighted average cost of capital = 6%

NOA at beginning = Net operating assets at beginning of the year (NOA of 2016 closing) = $18,800 - $14,800 = $4000

Therefore, Company's residual operating income = $10,200 - [ 6% x $4000 ] = $9,960

Is cost minimization equivalent or identical the concept of product maximization. True of False. Explain





Given a certain production level, cost minimization is equal to product maximization. Cost minimization refers to the production level where average total cost per unit is lowest. On the other hand, production maximization refers to maximizing product output given certain restraints, e.g. amount of raw materials, number of labor hours, etc. Product maximization basically refers to the efficiency of production.

If someone can achieve product maximization and cost minimization, they should be maximizing profit.

Portside Watercraft uses a job order costing system. During one month Portside purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of which $24,000 were indirect. Portside incurred a factory payroll of $95,000, of which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of direct labor cost. The journal entry to record the application of factory overhead to production is:



Payroll = $95,000,

Indirect labor   = $25000

Direct labor paid = $95000 - $25000 = $70000

∵ predetermined overhead application rate is 170 % of direct labor cost

Overhead applied to work in process = 70000 × 170 %

= $119,000

Journal entry:

Debit  ⇒ Work in process = $1190000

Credit ⇒ Factory Overheads = $119000

Final answer:

To record the application of factory overhead to production, you first calculate the direct labor cost, then multiply by the predetermined overhead rate. The journal entry is a debit to Work in Process and a credit to Factory Overhead for this calculated amount.


The Portside Watercraft company is using a job order costing system and a predetermined overhead rate based on direct labor cost. In this case, to record the application of factory overhead to production, you would first calculate the factory overhead applied by multiplying the direct labor cost (total labor cost minus indirect labor cost) by the predetermined rate.

The direct labor cost would be calculated by subtraction: $95,000 (total factory payroll) - $25,000 (indirect labor) = $70,000. Then multiply $70,000 by 170% (the predetermined overhead rate) to get $119,000. The journal entry would then be a debit to Work in Process for $119,000 and a credit to Factory Overhead for $119,000.

Learn more about direct labor cost here:


Determine proper classification (LO11-1) Analysis of an income statement, balance sheet, and additional information from the accounting records of Gadgets, Inc., reveals the following items. Required: Select the section of the statement of cash flows in which each of these items would be reported: operating activities (indirect method), investing activities, financing activities, or a separate noncash activities note.1. Purchase of a patent.
2. Depreciation expense
3. Issuance of a note payable
4. Increase in inventory



Patent-investing activity

depreciation expense-operating activity

issuance of note payable-financing activity

Increase in inventory-operating activity


The purchase of patent as intangible asset is reported as an investing activity item as an outflow of cash from the business.

Depreciation expense is meant to added to net income  in arriving at the net cash flows from operating activities

Issuance of a note payable is a financing item under the financing activities' segment of the cash flow as an inflow.

Increase in inventory is increase in net working capital which is deducted as an operating activity item .


1. Purchase of a patent - Investing activities

2. Depreciation expense - Operating activities

3. Issuance of a note payable - Financing activity

4. Increase in inventory - Operating activity


Operating activity of cash flows include cash inflows and cash outflows from day to day business activities. This includes cash flows use from ongoing business activities.

Investing activity of cash flows includes cash inflows and cash outflows from investments of the business. This includes purchase of assets, sale of assets, investment in securities.

Financing activity of cash flows include cash inflows and cash outflows to fund the company. The activities that are incurred to fiance the business are classified as financing activity.

Consider two products, X and Y, that have identical cost, retail price, and demand parameters and the same short selling season (the summer months from May through August). The newsvendor model is used to manage inventory for both products. Product X is to be discontinued at the end of the season this year and the leftover inventory will be salvaged at 75 percent of the cost. Product Y will be reoffered next summer, so any leftovers this year can be carried over to the next year while incurring a holding cost on each unit left over equal to 20 percent of the product's cost. The quantity of each product is selected to maximize expected profit. How do those quantities compare?


Answer: b. stocking quantity of product B is higher.


We are using the Newsvendor model and are told that the products have identical cost, retail price, and demand parameters and the same short selling season.

Using this model, it is important to understand 2 terminologies for this question, Overage cost and Underage costs.

Overage Costs is the cost of unused inventor and is calculated by subtracting Salvage Value from the cost price.

Underage costs are costs arising from unmet Demand. In this scenario they are the same because both products share the same demand.

The Overage costs for the products are,

Overage cost for Product X =100-75


Overage cost for Product Y = 20%

When deciding which product to stick more of we look at the one with the higher CRITICAL RATIO.

The formula of which is,

= Cu/(Cu+Co)


Cu is the Underage cost,

Co is the Overage cost

As earlier mentioned, both have the same Underage cost meaning that B will give a higher CRITICAL ratio as it's Co is smaller.

Product B should therefore be stocked more than Product A.


Stocking quantity of product B is higher


Overage cost for Product A(Co)=100-75=25%

Overage cost for Product B (Co)=20%

The underage cost (Cu) for both the products is same hence critical ratio i.e, Cu/(Cu+Co) is lower for product A than Product B which means product B should will be stocked more compare to product A

So the correct answer will be stocking quantity of product B is higher