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Business Accounting Loose Leaf For Managerial Accounting for Managers

1. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To compute : The estimated total fixed manufacturing overhead cost per quarter. Fixed manufacturing overhead per quarter is $140,000. Explanation: Manufacturing overhead in the first quarter is $300,000. Variable manufacturing overhead per unit is $2.00 The number of units to be produced in the first quarter is 80000 units F i x e d m a n u f a c t u r i n g o v e r h e a d p e r q u a r t e r = M a n u f a c t u r i n g o v e r h e a d − V a r i a b l e m a n u f a c t u r i n g o v e r h e a d = $ 300 , 000 − ( 80 , 000 × $ 2.00 ) = $ 300 , 000 − $ 160 , 000 $ 140 , 000 Fixed manufacturing overhead per quarter is $140,000. 2. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To calculate : The estimated unit product cost for the fourth quarter. The estimated unit product cost for the fourth quarter is 8.93 Explanation: m a n u f a c t u r i n g o v e r h e a d = F i x e d o v e r h e a d f o r t h e q u a r t e r − V a r i a b l e o v e r h e a d f o r t h e q u a r t e r = $ 140 , 000 − ( 60 , 000 × $ 2.00 ) = $ 140 , 000 − $ 120 , 000 $ 260 , 000 The manufacturing overhead in the fourth quarter is $260,000. The estimated unit product cost for the fourth quarter: Particular Amount ($) A Direct material 180000 B Direct labor 96000 C Manufacturing overhead 260000 D = A + B + C Total manufacturing cost 536000 E Number of units to be purchased 60000 F = D E Estimated unit product cost 8.93 The estimated unit product cost for the fourth quarter is 8.93 3. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To determine: The reason for the fluctuation in estimated unit product cost from one quarter to the next. The unit of production is decreased and the increase in unit product cost is increasing. Explanation: There is an increase in the unit product cost though there is a decrease in the level of production. This increase is because the fixed overhead is same for all the quarters whereas the number of units to be produced has decreased in second and third the quarters while again increased in the fourth quarter but it is also less than the first quarter. This results in an increase in unit product cost as this level of the product are decreasing whereas fixed overhead is constant due to which it is allocated to fewer units. 4. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To determine: The recommendation for stabilization in the company’s unit product cost with the help of computation. A predetermined rate should be used by the company for stabilizing the unit products cost Explanation: A predetermined rate should be used by the company for stabilizing the unit product cost. It is the overhead rate that is used to allocate total manufacturing overhead to jobs. Predetermine overhead rate: P r e d e t e r m i n e o v e r h e a d r a t e = E s t i m a t e d t o t a l m a n u f a c t u r i n g o v e r h e a d cos t E s t i m a t e d T o t a l a m o u n t o f t h e a l l o c a t i o n b a s e Fixed manufacturing overhead for the year: F i x e d m a n u f a c t u r i n g o v e r e h e a d = $ 140 , 000 × 4 = $ 560 , 000 Calculation of variable manufacturing overhead: T o t a l u n i t = 80 , 000 + 40 , 000 + 20 , 000 + 60 , 000 = 200 , 000 T o t a l var i a b l e m a n u f a c t u r i n g o v e r h e a d s = 200 , 000 × $ 2 = $ 400 , 000. T o t a l m a n u f a c t u r i n g o v e r h e a d s + var i a b l e m a n u f a c t u r i n g o v e r h e a d s = $ 560 , 000 + $ 400 , 000 = $ 960 , 000 Predetermined overhead rate: P r e d e t e r m i n e o v e r h e a d r a t e = E s t i m a t e d t o t a l m a n u f a c t u r i n g o v e r h e a d cos t E s t i m a t e d T o t a l a m o u n t o f t h e a l l o c a t i o n b a s e = $ 960 , 000 $ 200 , 000 = $ 4.80 p e r e u n i t Particular First quarter ($) Second quarter ($) Third quarter ($) Fourth quarter ($) A Direct material 240000 120000 60000 180000 B Direct labor 128000 64000 32000 96000 C Manufacturing overhead 384000 192000 96000 288000 D = A + B + C Total manufacturing cost 752000 376000 188000 564000 E Number of units to be purchased 80000 40000 20000 60000 F = D E Estimated unit product cost 9.40 9.40 9.4 9.40

1. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To compute : The estimated total fixed manufacturing overhead cost per quarter. Fixed manufacturing overhead per quarter is $140,000. Explanation: Manufacturing overhead in the first quarter is $300,000. Variable manufacturing overhead per unit is $2.00 The number of units to be produced in the first quarter is 80000 units F i x e d m a n u f a c t u r i n g o v e r h e a d p e r q u a r t e r = M a n u f a c t u r i n g o v e r h e a d − V a r i a b l e m a n u f a c t u r i n g o v e r h e a d = $ 300 , 000 − ( 80 , 000 × $ 2.00 ) = $ 300 , 000 − $ 160 , 000 $ 140 , 000 Fixed manufacturing overhead per quarter is $140,000. 2. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To calculate : The estimated unit product cost for the fourth quarter. The estimated unit product cost for the fourth quarter is 8.93 Explanation: m a n u f a c t u r i n g o v e r h e a d = F i x e d o v e r h e a d f o r t h e q u a r t e r − V a r i a b l e o v e r h e a d f o r t h e q u a r t e r = $ 140 , 000 − ( 60 , 000 × $ 2.00 ) = $ 140 , 000 − $ 120 , 000 $ 260 , 000 The manufacturing overhead in the fourth quarter is $260,000. The estimated unit product cost for the fourth quarter: Particular Amount ($) A Direct material 180000 B Direct labor 96000 C Manufacturing overhead 260000 D = A + B + C Total manufacturing cost 536000 E Number of units to be purchased 60000 F = D E Estimated unit product cost 8.93 The estimated unit product cost for the fourth quarter is 8.93 3. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To determine: The reason for the fluctuation in estimated unit product cost from one quarter to the next. The unit of production is decreased and the increase in unit product cost is increasing. Explanation: There is an increase in the unit product cost though there is a decrease in the level of production. This increase is because the fixed overhead is same for all the quarters whereas the number of units to be produced has decreased in second and third the quarters while again increased in the fourth quarter but it is also less than the first quarter. This results in an increase in unit product cost as this level of the product are decreasing whereas fixed overhead is constant due to which it is allocated to fewer units. 4. Introduction: Job costing is a technique of determining the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order and is determined as predetermined overhead. To determine: The recommendation for stabilization in the company’s unit product cost with the help of computation. A predetermined rate should be used by the company for stabilizing the unit products cost Explanation: A predetermined rate should be used by the company for stabilizing the unit product cost. It is the overhead rate that is used to allocate total manufacturing overhead to jobs. Predetermine overhead rate: P r e d e t e r m i n e o v e r h e a d r a t e = E s t i m a t e d t o t a l m a n u f a c t u r i n g o v e r h e a d cos t E s t i m a t e d T o t a l a m o u n t o f t h e a l l o c a t i o n b a s e Fixed manufacturing overhead for the year: F i x e d m a n u f a c t u r i n g o v e r e h e a d = $ 140 , 000 × 4 = $ 560 , 000 Calculation of variable manufacturing overhead: T o t a l u n i t = 80 , 000 + 40 , 000 + 20 , 000 + 60 , 000 = 200 , 000 T o t a l var i a b l e m a n u f a c t u r i n g o v e r h e a d s = 200 , 000 × $ 2 = $ 400 , 000. T o t a l m a n u f a c t u r i n g o v e r h e a d s + var i a b l e m a n u f a c t u r i n g o v e r h e a d s = $ 560 , 000 + $ 400 , 000 = $ 960 , 000 Predetermined overhead rate: P r e d e t e r m i n e o v e r h e a d r a t e = E s t i m a t e d t o t a l m a n u f a c t u r i n g o v e r h e a d cos t E s t i m a t e d T o t a l a m o u n t o f t h e a l l o c a t i o n b a s e = $ 960 , 000 $ 200 , 000 = $ 4.80 p e r e u n i t Particular First quarter ($) Second quarter ($) Third quarter ($) Fourth quarter ($) A Direct material 240000 120000 60000 180000 B Direct labor 128000 64000 32000 96000 C Manufacturing overhead 384000 192000 96000 288000 D = A + B + C Total manufacturing cost 752000 376000 188000 564000 E Number of units to be purchased 80000 40000 20000 60000 F = D E Estimated unit product cost 9.40 9.40 9.4 9.40

Solution Summary: The author explains job costing as determining the cost of a manufacturing job rather than the process of the job.

Loose Leaf For Managerial Accounting for Managers

Loose Leaf For Managerial Accounting for Managers

6th Edition

ISBN: 9781264445394

Author: Noreen, Eric, BREWER, Peter, Garrison, Ray

Publisher: McGraw Hill

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Loose Leaf For Managerial Accounting for Managers

Ch. 3 - Prob. 3.1Q Ch. 3 - Prob. 3.2Q Ch. 3 - Prob. 3.3Q Ch. 3 - Prob. 3.4Q Ch. 3 - Prob. 3.5Q Ch. 3 - Prob. 3.6Q Ch. 3 - Prob. 3.7Q Ch. 3 - Prob. 3.8Q Ch. 3 - Prob. 3.9Q Ch. 3 - Prob. 3.10Q

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