Brighton Services repairs locomotive engines. It employs 100 full-time workers at $17 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs. Direct materials $ 1,054,400 Direct labor 4,760,000 Manufacturing overhead 1,120,000 Of the $1,120,000 manufacturing overhead, 35 percent was variable overhead and 65 percent was fixed. This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow. Job Direct Materials Direct Labor 101 $ 139,100 $ 505,000 102 112,000 314,700 103 95,900 196,000 Total manufacturing overhead 273,100 Total marketing and administrative costs 129,000 You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi's senior partner has examined Brighton Services's accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows. Actual Manufacturing Overhead Variable Fixed 101 $ 31,800 $ 105,900 102 29,400 90,100 103 6,500 9,400 $ 67,700 $ 205,400 In the first quarter of this year, 30 percent of marketing and administrative cost was variable and 70 percent was fixed. You are told that Jobs 101 and 102 were sold for $875,000 and $588,000, respectively. All over- or underapplied overhead for the quarter is written off to Cost of Goods Sold. Required: a. Present in T-accounts the actual manufacturing cost flows for the three jobs in the first quarter of this year. b. Using last year's overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead. c. Present in T-accounts the normal manufacturing cost flows for the three jobs in the first quarter of this year. Use the overhead rates derived in requirement (b).
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.
Brighton Services repairs locomotive engines. It employs 100 full-time workers at $17 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs.
| Direct materials | $ | 1,054,400 | |
| Direct labor | 4,760,000 | ||
| Manufacturing |
1,120,000 | ||
Of the $1,120,000 manufacturing overhead, 35 percent was variable overhead and 65 percent was fixed.
This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow.
| Job | Direct Materials | Direct Labor | ||||
| 101 | $ | 139,100 | $ | 505,000 | ||
| 102 | 112,000 | 314,700 | ||||
| 103 | 95,900 | 196,000 | ||||
| Total manufacturing overhead | 273,100 | |||||
| Total marketing and administrative costs | 129,000 | |||||
You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi's senior partner has examined Brighton Services's accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows.
| Actual Manufacturing Overhead | |||||
| Variable | Fixed | ||||
| 101 | $ | 31,800 | $ | 105,900 | |
| 102 | 29,400 | 90,100 | |||
| 103 | 6,500 | 9,400 | |||
| $ | 67,700 | $ | 205,400 | ||
In the first quarter of this year, 30 percent of marketing and administrative cost was variable and 70 percent was fixed. You are told that Jobs 101 and 102 were sold for $875,000 and $588,000, respectively. All over- or underapplied overhead for the quarter is written off to Cost of Goods Sold.
Required:
a. Present in T-accounts the actual
b. Using last year's overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead.
c. Present in T-accounts the normal manufacturing cost flows for the three jobs in the first quarter of this year. Use the overhead rates derived in requirement (b).
d. Calculate operating
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