4-36 Job costing, accounting for manufacturing overhead, budgeted rates. The Solomon Company uses a job-costing system at its Dover, Delaware, plant. The plant has a machining department and a finishing department. Solomon uses normal costing with two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department with machine-hours as the allocation base and the finishing department with direct manufacturing labor costs as the allocation base). The 2017 budget for the plant is as follows: Machine Department Finished Department Manufacturing Overhead Cost 10,660,000 8,000,000 Direct Manufacturing labor cost 970,000 4,000,000 Direct Manufacturing labor-hours 26,000 160,000 Machine Hours 205,000 31,000 Required: 1: Prepare an overview diagram of Solomon’s job-costing system. 2: What is the budgeted manufacturing overhead rate in the machining department? In the finishing department? 3: During the month of January, the job-cost record for Job 431 shows the following: Machine Department Finished Department Direct Materials Used 16,150 3,000 Direct Manufacturing labor cost 350 1,300 Direct Manufacturing labor-hours 30 50 Machine Hours 150 20 Compute the total manufacturing overhead cost allocated to Job 431. 4: Assuming that Job 431 consisted of 400 units of product, what is the cost per unit? 5: Amounts at the end of 2017 are as follows: Machine Department Finished Department Manufacturing Overhead incurred 13,250,000 8,400,000 Direct Manufacturing labor cost 1,000,000 4,300,000 Machine Hours 250,000 30,000 Compute the under- or overallocated manufacturing overhead for each department and for the Dover plant as a whole. 6: Why might Solomon use two different manufacturing overhead cost pools in its job-costing system?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
4-36
Machine Department Finished Department
Manufacturing Overhead Cost 10,660,000 8,000,000
Direct Manufacturing labor cost 970,000 4,000,000
Direct Manufacturing labor-hours 26,000 160,000
Machine Hours 205,000 31,000
Required:
1: Prepare an overview diagram of Solomon’s job-costing system.
2: What is the budgeted manufacturing overhead rate in the machining department? In the finishing department?
3: During the month of January, the job-cost record for Job 431 shows the following:
Machine Department Finished Department
Direct Materials Used 16,150 3,000
Direct Manufacturing labor cost 350 1,300
Direct Manufacturing labor-hours 30 50
Machine Hours 150 20
Compute the total manufacturing overhead cost allocated to Job 431.
4: Assuming that Job 431 consisted of 400 units of product, what is the cost per unit?
5: Amounts at the end of 2017 are as follows:
Machine Department Finished Department
Manufacturing Overhead incurred 13,250,000 8,400,000
Direct Manufacturing labor cost 1,000,000 4,300,000
Machine Hours 250,000 30,000
Compute the under- or overallocated manufacturing overhead for each department and for the Dover plant as a whole.
6: Why might Solomon use two different manufacturing overhead cost pools in its job-costing system?
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