Question

Norwegian Cruise liners uses job order cost to determine the costs of the ships it produces. During the year 2014 it worked on 4 different types of ships, Family Fun, Romantic Travels, Executive Class, and Luxury Liners. The company has determined that machine hours are the best predictor of FOH costs. All 4 ships were completed before the end of the year and costs incurred on each ship by the end of 2014 are as follows: Family Fun Romantic Travels Executive Class Luxury Liners DM $46,000,000 $54,000,000 $82,000,000 $97,000,000 DL $22,000,000 $33,000,000 $45,000,000 $62,000,000 FOH costs for Norwegian Cruise liners in 2013 were $148,000,000 and a total of 1,600,000 machine hours were used. FOH costs for Norwegian Cruise liners in 2014 were $162,500,000. Norwegian Cruise liners used the following # of machine hours to complete each ship in 2014: Family Fun Romantic Travels Executive Class Luxury Liners Machine Hours 200,000 350,000 475,000 650,000 Questions: 1. Calculate the pre-determined FOH rate for Norwegian Cruise liners 2. Determine the amount of FOH applied for the year 2014 for Norwegian Cruise liners 3. Determine the amount of overapplied or underapplied factory overhead for 2014 4. Prepare the adjusting journal entry 5. Determine the unit cost of producing each of the 4 ships

Answer 1

ans 1
Predetermined overhead rate
Estimated Overhead/estimated Machine hours
148000000/1600000	92.50
ans 2
	No. of machine hours A	Overhead rate B	Applied A*B
Family Fun	200000	92.50	18500000
Romantic travels	350000	92.50	32375000
Executive class	475000	92.50	43937500
Luxury Liners	650000	92.50	60125000
Total	1675000		154937500
ans 3
Actual FOH	$162,500,000
Less: Applied	154937500
Underapplied	$7,562,500
Ans 4	Dr	Cr
Cost of Good sold	$7,562,500
Fixed Manufacturing overhead		$7,562,500
ans 5
Unit cost	DM	DL	FOH	Underapplied	Total (if with underapplied)	Total without underapplied FOH
Family Fun	$46,000,000	$22,000,000	18500000	$902,985	$87,402,985	$86,500,000
				(7562500/1675000*200000)
Romantic travels	$54,000,000	$33,000,000	32375000	$1,580,224	$120,955,224	$119,375,000
Executive class	$82,000,000	$45,000,000	43937500	$2,144,590	$173,082,090	$170,937,500
Luxury Liners	$97,000,000	$62,000,000	60125000	$2,934,701	$222,059,701	$219,125,000
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