1 Budgeted manufacturing overhead rate Budgeted manufacturing overhead Budgeted

1 budgeted manufacturing overhead rate budgeted

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1. Budgeted manufacturing overhead rate = Budgeted manufacturing overheadBudgeted machine hours= $2,850,000190,000 machine-hours= $15/machine-hour 2. Manufacturing overhead allocated = Actual machine-hours × Budgeted manufacturing overhead rate = 195,000 × $15 = $2,925,000 3. Since manufacturing overhead allocated is greater than the actual manufacturing overhead costs, Waheed overallocated manufacturing overhead: Manufacturing overhead allocated $2,925,000 Actual manufacturing overhead costs 2,910,000Overallocated manufacturing overhead $ 15,000
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4-7 4-20 (20-30 min.)Job costing, accounting for manufacturing overhead, budgeted rates. 1. An overview of the product costing system is COST OBJECT:PRODUCTCOSTALLOCATIONBASEDIRECTCOSTMachining DepartmentManufacturing OverheadMachine-HoursDirectMaterialsINDIRECTCOSTPOOLDirectManufacturingLaborIndirect CostsDirect CostsAssembly DepartmentManufacturing OverheadDirect Manuf.Labor CostBudgeted manufacturing overhead divided by allocation base: Machining overhead 000,50000,800,1$= $36 per machine-hour Assembly overhead: 000,000,2$000,600,3$= 180% of direct manuf. labor costs 2. Machining department, 2,000 hours $36 $72,000 Assembly department, 180% $15,000 27,000Total manufacturing overhead allocated to Job 494 $99,0003. Machining AssemblyActual manufacturing overhead $2,100,000 $ 3,700,000 Manufacturing overhead allocated, 55,000 $36 1,980,000 180% $2,200,000 3,960,000Underallocated (Overallocated) $ 120,000$ (260,000)
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4-8 4-21 (2025 min.) Job costing, consulting firm. 1. Budgeted indirect-cost rate = $13,000,000 ÷ $5,000,000 = 260% of professional labor costs 2.At the budgeted revenues of $20,000,000, Taylor’s operating income of$2,000,000 equals 10% of revenues. Markup rate = $20,000,000 ÷ $5,000,000 = 400% of direct professional labor costs COSTALLOCATIONBASEConsultingSupportCOST OBJECT:JOB FORCONSULTINGCLIENTDIRECTCOSTSIndirect CostsDirect CostsINDIRECTCOSTPOOLProfessionalLabor CostsProfessionalLabor CostsProfessionalLabor
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4-9 3. Budgeted costs Direct costs: Director, $200 3 $ 600 Partner, $100 16 1,600 Associate, $50 40 2,000 Assistant, $30 160 4,800$ 9,000 Indirect costs: Consulting support, 260% $9,000 23,400Total costs $32,400As calculated in requirement 2, the bid price to earn a 10% income-to-revenue margin is 400% of direct professional costs. Therefore, Taylor should bid 4 $9,000 = $36,000 for the Red Rooster job. Bid price to earn target operating income-to-revenue margin of 10% can also be calculated as follows: Let R = revenue to earn target income R 0.10R = $32,400 0.90R = $32,400 R = $32,400 ÷ 0.90 = $36,000 or, Direct costs $ 9,000 Indirect costs 23,400 Profit (0.40 9,000) 3,600Bid price $36,000
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4-10 4-22 (1520 min.)Service industry, time period used to compute indirect cost rates. 1. JanMarch AprilJune JulySept OctDec Total Direct labor costs $400,000 $280,000 $250,000 $270,000 $1,200,000 Variable costs as percentage of direct labor costs 90% 60% 60% 60% Variable overhead costs (Percentage direct labor costs) $360,000 $168,000 $150,000 $162,000 $ 840,000 Fixed overhead costs 300,000300,000300,000300,0001,200,000Total overhead costs $660,000$468,000$450,000$462,000$2,040,000Total overhead costs as a percentage of direct labor costs 165% 167% 180% 171% 170% Budgeted Overhead Rate Used Job 332 JanMarch Rate JulySept Rate Average Yearly Rate Direct materials $10,000 $10,000 $10,000 Direct labor costs 6,000 6,000 6,000 Overhead allocated (variable + fixed) (165%; 180%; 170% of $6,000) 9,90010,80010,200Full cost of Job 332 $25,900$26,800$26,200(a)
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