Example Job Order Costing + solution (1).doc PDF

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Example Job Order CostingA company allocates manufacturing overhead to jobs on the basis of departmental rates. For department 1 on the basis of machine hours, for department 2 on the basis of direct labor costs. For 2013 has been budgeted:department 1 department 2 direct labor costs $ 840,000 $ 600...

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Example Job Order Costing A company allocates manufacturing overhead to jobs on the basis of departmental rates. For department 1 on the basis of machine hours, for department 2 on the basis of direct labor costs. For 2013 has been budgeted:

- direct labor costs - manufacturing overhead - direct labor hours (DLH) - machine hours (MH)

department 1

department 2

$ 840,000 - 900,000 80.000 240.000

$ 600,000 - 720,000 80.000 15.000

department 1

department 2

$ 10,000 - 9,600 800 3.000

$ 30,000 - 8,000 1.000 200

For job 412 is given:

- direct material costs - direct labor costs - direct labor hours - machine hours 1. 2.

Calculate total manufacturing costs of job 412. If we had used a plantwide overhead rate on the basis of direct labor hours, what would have been total cost of the job?

At the end of 2013 the following information is available: department 1 - direct labor costs incurred - manufacturing overhead incurred - actual direct labor hours - actual machine hours 3.

$ 875,000 - 960,000 85.000 230.000

department 2 $ 745,000 - 750,000 95.000 16.000

Calculate for department 1 and 2 over/underapplied overhead over 2013.

Solution Department 1: Factory overhead/machine hours (MH) = $ 900.000/240.000 MH = $ 3,75 per MH. Department 2: Factory overhead/direct labor costs = $ 720.000/$ 600.000 = 120% of direct labor costs. Question 1 Job 412 Direct material costs Direct labor costs Overhead applied Department 1 3.000 MH x $ 3,75 == Department 2 120% x $ 8.000 = Total costs

$ 40.000 $ 17.600 $ 11.250 $ 9.600 $ 78.450

Question 2 Plantwide overhead rate on the basis of direct labor hours; $ 1.620.000/160.000 DLH = $ 10,125 per DLH Job 412 Direct material costs Direct labor costs Overhead applied 1.800 DLH x $ 10,125 =

$ 40.000 $ 17.600 $ 18.225

Total

$ 75.825

Question 3 department 1

department 2

Actual overhead

$ 960.000

$ 750.000

Overhead applied 230.000 MH x $ 3,75 120% x $ 745.000 =

$ 862.500

Underapplied Overapplied

$

894.000

$

144.000

$ 97.500...