Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B: Estimated Data Machining Assembly Total Manufacturing overhead $ 2,816,000 $ 256,000 $ 3,072,000 Direct labor hours 16,000 176,000 192,000 Machine hours 176,000 11,000 187,000 Job A Machining Assembly Total Direct labor hours 5 10 15 Machine hours 11 2 13 Job B Machining Assembly Total Direct labor hours 4 5 9 Machine hours 12 3 15 Required: 1. If Mason Company uses a plantwide predetermined overhead rate with direct labor-hours as the allocation base, how much manufacturing overhead cost would be applied to Job A? Job B? (Round your answers to the nearest whole dollar amount.) 2. Assume that Mason Company uses departmental predetermined overhead rates. The Machining Department is allocated based on machine-hours and the Assembly Department is allocated based on direct labor-hours. How much manufacturing overhead cost would be applied to Job A? Job B? (Round your intermediate calculations and final answers to 2 decimal places.) 1. Manufacturing overhead applied Job A Manufacturing overhead applied Job B 2. Manufacturing overhead applied Job A Manufacturing overhead applied Job 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.
Problem 2-21 Plantwide Versus Multiple Predetermined Overhead Rates [LO2-1, LO2-2]
Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B:
| Estimated Data | Machining | Assembly | Total | ||||||
| Manufacturing overhead | $ | 2,816,000 | $ | 256,000 | $ | 3,072,000 | |||
| Direct labor hours | 16,000 | 176,000 | 192,000 | ||||||
| Machine hours | 176,000 | 11,000 | 187,000 | ||||||
| Job A | Machining | Assembly | Total |
| Direct labor hours | 5 | 10 | 15 |
| Machine hours | 11 | 2 | 13 |
| Job B | Machining | Assembly | Total |
| Direct labor hours | 4 | 5 | 9 |
| Machine hours | 12 | 3 | 15 |
Required:
1. If Mason Company uses a plantwide predetermined overhead rate with direct labor-hours as the allocation base, how much
2. Assume that Mason Company uses departmental predetermined overhead rates. The Machining Department is allocated based on machine-hours and the Assembly Department is allocated based on direct labor-hours. How much manufacturing overhead cost would be applied to Job A? Job B? (Round your intermediate calculations and final answers to 2 decimal places.)
| 1. | Manufacturing overhead applied Job A | |
| Manufacturing overhead applied Job B | ||
| 2. | Manufacturing overhead applied Job A | |
| Manufacturing overhead applied Job B |
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