exercise2.1 - AC2720 Module 2 Basics of Accounting and...

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AC2720: Module 2 Basics of Accounting and Costing Systems Exercise 2.1 Job Costing and Process Costing 1 There are four problems in this assessment. You need to complete all four problems. Problem 1: Actual Costing, Normal Costing, Accounting for Manufacturing Overhead Destin Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Destin allocates manufacturing overhead costs using direct manufacturing labor costs. Destin provides the following information: Budget for 2014 Actual Results for 2014 Direct material costs $2,000,000 $1,900,000 Direct manufacturing labor costs $1,500,000 $1,450,000 Manufacturing overhead costs $2,700,000 $2,755,000 Answer the following questions: 1. Compute the actual and budgeted manufacturing overhead rates for 2014. 2. During March, the job-cost record for Job 626 contained the following information: Direct materials used $40,000 Direct manufacturing labor costs $30,000 3. Compute the cost of Job 626 using (a) actual costing and (b) normal costing. 4. At the end of 2014, compute the under- or over-allocated manufacturing overhead under normal costing. Why is there no under- or over-allocated overhead under actual costing? 5. Why might managers at Destin Products prefer to use normal costing?
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