S2 0910 Question 2b) see if it is correct: FOBV = actual fixed OH Budgeted Fixed OH = 10,000,000 11,000,000 = 1 mil F FOVV = Budgeted

fixed OH applied fixed OH = 11,000,000 12,100,000 = 1.1 mil F Journal entries: 1) To record FOH FOH 10 m Cash/ a/p 2) To apply FOH WIP FOBV FOVV FOH 12.1 1 1.1 10

10 m

Dr FOH (actual) 10mi Dr FOBV Dr FOSV 1mil 1.1mil

CR FOH (applied) 12.1mil

Bobby suggested tis during my class (dun need close to COGS) 3) Closing to COGS FOBV FOVV COGS Question 2 e) Is the new standard cost $30? Workings= (1,200,000(10) + (0.5m + 0.2m)(10) + 11,000,000) / 1 m Yea correct But bobby suggested still list out all the parts like 1.2 mil units@$10 0.7mil hrs @ 10/hr Fixed overhead: 11mil 1 1 2.1

S1 0910

1e) Do you agree with the general manager s proposal to use machine hours for plan wide factory overhead application? Explain why or why not. how to do?!

Oh this was in your friend s snr notes! FOR MINISTRY OF DEFENCE JOB, E102 (price = cost + markup) If use machine hours instead of plantwide: Calculations will be like this: (2,000,000+3,500,000+5,500,000) / (5000 + 50,000 +55,000) =100/MH as compared to 110/DLH New FOH= 100 X 290 = 290,000 as compared to 154,000 Increase in cost by 290,000 154,000 = 136,000 So price= 136,000X10% MORE = more profit ETHICAL ISSUE The manager has self-interested behavior, greater profits greater compensation But using plantwide rate by MH, not relevant as dept A is not using MH also.. no ideal rate to use.. go to part (f) for suggestion. But I tink this question more of ethical issue