categories direct materials and direct manufacturing labor and a single

Categories direct materials and direct manufacturing

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categories (direct materials and direct manufacturing labor) and a single indirect-cost pool (manufacturing overhead, allocated using direct manufacturing labor-hours). The indirect cost allocation rate of the simple system for 2018 would have been $200 per direct manufacturing labor-hour. Recently a team with members from product design, manufacturing, and accounting used an ABC approach to refine its job-costing system. The two direct-cost categories were retained. The team decided to replace the single indirect-cost pool with five indirect-cost pools. The cost pools represent five activity areas at the plant, each with its own supervisor and budget responsibility. Pertinent data are as follows:
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Activity Area Cost-Allocation Base Cost Allocation Rate Materials handling Parts $5.00 Lathe Work Lathe turns 10.00 Milling Machine-hours 20.00 Grinding Parts 5.00 Testing Units tested 30.00 ABC system information: Required: 1. Compute manufacturing cost per unit under simple job costing 2. Compute manufacturing cost per unit under ABC. Job A Job B Direct material cost per job $20,000 $60,000 Direct manufacturing labor cost per job 12,000 23,000 Number of direct manufacturing labor-hours per job 75 1,000 Parts per job 500 1,900 Lathe turns per job 30,000 50,000 Machine-hours per job 2,000 900 Units per job (all units are tested) 600 1,200
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  • Fall '17
  • Marcus Jacob Papilaja
  • Alexis, Alexis’s cost records

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