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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
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 isCOST OBJECT:PRODUCTCOSTALLOCATIONBASEDIRECTCOSTMachining DepartmentManufacturing OverheadMachine-HoursDirectMaterialsINDIRECTCOSTPOOLDirectManufacturingLaborIndirect CostsDirect CostsAssembly DepartmentManufacturing OverheadDirect Manuf.Labor CostBudgeted manufacturing overhead divided by the budgeted quantity of the allocation base:Machining Department overhead:$1,500,00030,000= $50 per machine-hourAssembly Department overhead:$5,100,000$3,000,000= 170% of direct manuf. labor costs2.Machining department overhead allocated, 2,800 hours $50$140,000Assembly department overhead allocated, 170% $19,00032,300Total manufacturing overhead allocated to Job 494$172,3003.Machining Dept.Assembly Dept.Actual manufacturing overhead$1,800,000$ 5,300,000Manufacturing overhead allocated,$50 33,000 machine-hours1,650,000— 170% $3,200,000— 5,440,000Underallocated (Overallocated)$ 150,000$ (140,000)4-4
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