Assume the following amounts appeared at the end of 2020: Production plant Machine department Assembly department Manufacturing overhead costs incurred 15,000,000 11,973,000 Direct manufacturing labor costs 1,545,000 6,150,000 Machine-hours 300,000 51,000 4 Compute the under- or overallocated manufacturing overhead for each department and for the production plant as a whole.
Last question 4)
The company uses normal costing with two direct-cost categories:
- Direct materials
- Direct manufacturing labor
Furthermore, the company uses two manufacturing
- Machining department with machine- hours as the allocation base
- Assembly department with direct manufacturing labor costs as the allocation base.
The budget for the plant in 2020 is as follows:
|
Production plant |
Machine department |
Assembly department |
|
Manufacturing overhead costs
|
13 597 500
|
12 271 500
|
|
Direct manufacturing labor costs
|
1 455 000
|
6 075 000
|
|
Direct manufacturing labor-hours
|
54 000
|
22 500
|
|
Machine-hours |
277 500 |
55 500 |
- What is the budgeted manufacturing overhead rate in the machining and the assembly department?
Overhead is the direct cost involved in the production process of the business of the company
Calculation of budgeted manufacturing overhead rate in machine department:
Budgeted manufacturing overhead rate
=manufacturing overhead costs/ machine-hours
=13597500/277500
=49$
Calculation of budgeted manufacturing overhead rate in assembly department:
Budgeted manufacturing overhead rate=manufacturing overhead costs/labour-hours
=12,271,500/22,500
=545.40$
During the month of January 2020, the job-cost record for Job 123 shows the following:
|
Job 123:
|
Machine Department |
Assembly Department |
|
Manufacturing overhead costs
|
19,500
|
7,500
|
|
Direct manufacturing labor costs
|
1,350
|
1,875
|
|
Direct manufacturing labor-hours
|
30
|
105
|
|
Machine-hours |
210 |
30 |
2)Compute the total manufacturing overhead cost allocated to Job 123.
|
Manufacturing overhead costs for job 123 |
|||
|
Machine department |
Assembly department |
total |
|
|
Overhead costs |
19,500 |
7,500 |
|
|
cost drivers |
|||
|
Total machine hours |
240 |
||
|
total direct manufacturing labour costs |
3,225 |
||
|
Manufacturing overhead rate |
81.25 |
2.33 |
|
|
Allocation of |
|||
|
Machine department |
17,062.50 |
2,437.50 |
|
|
Assembly department |
3,139.53 |
2,360.47 |
|
|
Total manufacturing cost allocated |
20,202.03 |
6,797.97 |
27,000 |
- Assume that Job 123 produced 450 units, calculate the cost per unit.
|
cost per unit computation |
||
|
direct cost: |
||
|
Direct manufacturing labour costs |
3,225 |
|
|
Indirect cost: |
||
|
Machine department |
20,202.03 |
|
|
Assembly department |
6,797.97 |
|
|
total indirect cost |
27,000 |
|
|
total cost |
30,225 |
|
|
unit produced |
450.00 |
|
|
cost per unit |
67.17 |
Assume the following amounts appeared at the end of 2020:
|
Production plant |
Machine department |
Assembly department |
|
Manufacturing overhead costs incurred
|
15,000,000
|
11,973,000
|
|
Direct manufacturing labor costs
|
1,545,000
|
6,150,000
|
|
Machine-hours |
300,000 |
51,000 |
4 Compute the under- or overallocated manufacturing overhead for each department and for the production plant as a whole.
- Briefly explain why Canadian Company in Dubai uses two different manufacturing overhead cost pools in its job-costing system?
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