PlayCraft Co

question 46

Essay

PlayCraft Co.manufactures toy boats.During 2019, total costs incurred in making 54,000 toy boats included $189,000 of fixed manufacturing overhead.The total absorption cost per toy boat was $28.50.
(a.)Calculate the variable cost per toy boat.
(b.)The ending inventory of toy boats was 11,600 units higher at the end of 2019 than at the beginning of the year.By how much and in what direction (higher or lower)would cost of goods sold for 2019 be different under direct costing than under variable costing?
(c.)Express the toy boat cost in a cost formula.What does this formula suggest the total cost of making an additional 5,800 toy boats would be?

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Definitions:

Overapplied Manufacturing Overhead

A situation where the allocated manufacturing overhead costs exceed the actual overhead costs incurred; this leads to an adjustment in cost accounting records.

Work in Process

Goods in various stages of completion throughout the factory, not yet ready for sale, comprising direct labor, material, and manufacturing overhead.

Overapplied Manufacturing Overhead

This occurs when the allocated manufacturing overhead costs are more than the actual overhead costs incurred.

Underapplied Manufacturing Overhead

This occurs when the allocated cost for manufacturing overhead is less than the actual overhead costs incurred, indicating a shortfall in cost coverage.