Job costing accounting for manufacturing overhead budgeted rates The Matthew

Job costing accounting for manufacturing overhead

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4-25 Job costing, accounting for manufacturing overhead, budgeted rates.The MatthewCompany uses a normal job-costing system at its Minneapolis plant. The plant has a machiningdepartment and an assembly department. Its job-costing system has two direct-cost categories(direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (themachining department overhead, allocated to jobs based on actual machine-hours, and theassembly department overhead, allocated to jobs based on actual direct manufacturing laborcosts). The 2017 budget for the plant is as follows:Required:1.Present an overview diagram of Matthew’s job-costing system. Compute the budgeted manufacturing overhead rate for each department.2.During February, the job-cost record for Job 494 contained the following:Compute the total manufacturing overhead costs allocated to Job 494.3.At the end of 2017, the actual manufacturing overhead costs were $1,800,000 in machiningand $5,300,000 in assembly. Assume that 33,000 actual machine-hours were used in4-3
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machining and that actual direct manufacturing labor costs in assembly were $3,200,000. Compute the over or underallocated manufacturing overhead for each department. SOLUTION (20-30 min.) Job costing, accounting for manufacturing overhead, budgeted rates. 1. An overview of the product costing system is COST OBJECT: PRODUCT COST ALLOCATION BASE DIRECT COST Machining Department Manufacturing Overhead Machine-Hours Direct Materials INDIRECT COST POOL Direct Manufacturing Labor Indirect Costs Direct Costs Assembly Department Manufacturing Overhead Direct Manuf. Labor Cost Budgeted manufacturing overhead divided by the budgeted quantity of the allocation base: Machining Department overhead: $1,500,000 30,000 = $50 per machine-hour Assembly Department overhead: $5,100,000 $3,000,000 = 170% of direct manuf. labor costs 2. Machining department overhead allocated, 2,800 hours $50 $140,000 Assembly department overhead allocated, 170% $19,000 32 ,300 Total manufacturing overhead allocated to Job 494 $172 ,300 3. Machining Dept. Assembly Dept. Actual manufacturing overhead $1,800,000 $ 5,300,000 Manufacturing overhead allocated, $50 33,000 machine-hours 1,650,000 170% $3,200,000 5 ,440,000 Underallocated (Overallocated) $ 150 ,000 $ (140 ,000 ) 4-4
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4-26 Job costing, consulting firm. Frontier Partners, a management consulting firm, has thefollowing condensed budget for 2017:Frontier has a single direct-cost category (professional labor) and a single indirect-cost pool(client support). Indirect costs are allocated to jobs on the basis of professional labor costs.Required:1.Prepare an overview diagram of the job-costing system. Calculate the 2017 budgetedindirect-cost rate for Frontier Partners.2.The markup rate for pricing jobs is intended to produce operating income equal to 10% ofrevenues. Calculate the markup rate as a percentage of professional labor costs.3.Frontier is bidding on a consulting job for Sentinel Communications, a wirelesscommunications company. The budgeted breakdown of professional labor on the job is asfollows:Calculate the budgeted cost of the Sentinel Communications job. How much will Frontier bid forthe job if it is to earn its target operating income of 10% of revenues? 4-5
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