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ateness of the company's cost drivers

ateness of the company's cost drivers

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PR 3-48 (Algo) Part 7 Comment on the appropriateness of the company's cost drivers... 7. Comment on the appropriateness of the company's cost drivers (e, the use of machine hours in Machining and direct-labor cost in Assembly) Comment on the appropriateness of the company's cost drivers
Transcribed Image Text:PR 3-48 (Algo) Part 7 Comment on the appropriateness of the company's cost drivers... 7. Comment on the appropriateness of the company's cost drivers (e, the use of machine hours in Machining and direct-labor cost in Assembly) Comment on the appropriateness of the company's cost drivers
Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated, in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended: Items Budgeted manufacturing overhead Actual manufacturing overhead Machining Department Budgeted direct-labor cost (based on practical capacity) Actual direct-labor cost Budgeted machine hours (based on practical capacity) Actual machine hours The data that follow pertain to job number 775, the only job in production at year-end. Assembly Department Items Direct material Direct labor Machine hours: Selling and administrative expense amounted to $2,500,000. $ 24,500 $ 27,900 360 Machining Department $ 6,800 $ 58,600 150 $ 4,000,000 4,270,000 1,500,000 1,450,000 400,000 425,000 Assembly Department $3,080,000 3,050,000 5,600,000 5,780,000 100,000 110,000
Transcribed Image Text:Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated, in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended: Items Budgeted manufacturing overhead Actual manufacturing overhead Machining Department Budgeted direct-labor cost (based on practical capacity) Actual direct-labor cost Budgeted machine hours (based on practical capacity) Actual machine hours The data that follow pertain to job number 775, the only job in production at year-end. Assembly Department Items Direct material Direct labor Machine hours: Selling and administrative expense amounted to $2,500,000. $ 24,500 $ 27,900 360 Machining Department $ 6,800 $ 58,600 150 $ 4,000,000 4,270,000 1,500,000 1,450,000 400,000 425,000 Assembly Department $3,080,000 3,050,000 5,600,000 5,780,000 100,000 110,000
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