P 9-30: Magic Floor Magic Floor produces and sells a complete line of floor care

Question

P 9-30: Magic Floor Magic Floor produces and sells a complete line of floor care products: wax strippers, floor soaps, and floor waxes, All of these products are packaged on a new high-speed bottling fill line. Empty bottles (pints, quarts, half gallons, or gallons) are automatically removed from their boxes and placed on the line. The empty bottles are then filled, sealed with a foil closure, capped with a screw, and labeled. The filled, sealed, capped, and labeled bottles go to a weigh station to ensure each bottle has the correct amount of fill, and the nonrejected packaged bottles are placed in boxes and a bar-coded shipping label is attached. The fill line requires minimal direct labor once it is programmed for the bottle size, contents, and the bar-coded labels. The decision to purchase the 446 Chapter 9 fill line in 2014 was justified under the assumption that the line would run 7 hours a day, 5 days a week, and 50 weeks a year The 2017 budget for the fill line is: 77,000 182,000 127,000 29,000 27,000 Maintenance Indirect labor Utilities Indirect supplies Magic Floor's 2017 budgeted production is: Filled Bottles Pints Gallons 50,000 62.000 55.000 60,000 79,000 68,000 47,000 70,000 49.000 Wax stripper 40,000 48,000 44.000 Magic Floor allocates the fill line costs to the various bottled products using a predetermined overhead absorption rate calculated based on budgeted costs divided by budgeted volume. Budgeted volume is measured in seconds on the fill line. Pints are filled in 3 seconds, quarts in 5 seconds, half gallons in 9 seconds, and gallons in 17 seconds. During 2017, the following times (in seconds) were recorded for filling bottles on the fill line: Quarts 246,000 305.000 270,000 Half-Gallons 118,000 145,000 130,000 Wax stripper 800,000 1.180,000 Wax 608,000 Actual overhead costs incurred in 2017 on the fill line are: Indirect labor Depreciation Utilities Indirect supplies S 76,000 179,000 127,000 28,000 25,000 Required: a. Calculate the expected volume of the bottling fill line for 2017 b. Calculate the normal volume of the bottling fill line for 2017 c. Calculate the overhead absorption rate for the bottling fil line for 2017 based on expected d. Calculate the overhead absorption rate for the bottlingfil line for 2017 based on normal e. Calculate the over/underabsorbed overhead amount for the bottling fill line for 2017 based f. Calculate the over/underabsorbed overhead amount for the bottling fill line for 2017 based 8. Explain in intuitive terms why your answers in parts (e) and (f) differ. volume (round overhead rate to four decimals). volume (round overhead rate to four decimals). on expected volume on normal volume.

Explanation / Answer

Since, there are multiple parts to the question, I have answered the first four parts.

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Part 1)

The expected volume of the bottling fill line is calculated as follows:

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Part 2)

The normal volume of the bottling fill line is determined as below:

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Part 3)

The overhead absorption rate based on expected volume is calculated as below:

Overhead Absorption Rate based on Expected Volume = (Budgeted Costs)/Total Expected Volume = (Maintenance + Indirect Labor + Depreciation + Utilities + Indirect Supplies)/Total Expected Volume = (77,000 + 182,000 + 127,000 + 29,000 + 27,000)/5,916,000 = $0.0747

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Part 4)

The overhead absorption rate based on normal volume is calculated as below:

Overhead Absorption Rate based on Normal Volume = (Budgeted Costs)/Total Normal Volume = (Maintenance + Indirect Labor + Depreciation + Utilities + Indirect Supplies)/Total Expected Volume = (77,000 + 182,000 + 127,000 + 29,000 + 27,000)/6,300,000 = $0.0702

Pints Quarts ½ gallons Gallons Total Expected Seconds Wax Stripper 40,000 50,000 60,000 47,000 Soap 48,000 62,000 79,000 70,000 Wax 44,000 55,000 68,000 49,000 Total 132,000 167,000 207,000 166,000 Fill Time (seconds) 3 5 9 17 Total Time $396,000 $835,000 $1,863,000 $2,822,000 $5,916,000

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