Cost object job 4 26 2 budgeted manufacturing

This preview shows page 25 - 29 out of 41 pages.

COST OBJECT: JOB
Image of page 25

Subscribe to view the full document.

4-26 2. Budgeted manufacturing overhead divided by allocation base: a. Machining Department: $12,000,000 250,000 = $48 per machine-hour b. Finishing Department: $10,000,000 $5,000,000 = 200% of direct manufacturing labor costs 3. Machining Department overhead, $48 × 140 hours $6,720 Finishing Department overhead, 200% of $1,400 2,800 Total manufacturing overhead allocated $9,520 4. Total costs of Job 289: Direct costs: Direct materials––Machining Department $15,000 ––Finishing Department 4,000 Direct manufacturing labor —Machining Department 650 —Finishing Department 1,400 $21,050 Indirect costs: Machining Department overhead, $48 × 140 $6,720 Finishing Department overhead, 200% of $1,400 2,800 9,520 Total costs $30,570 The per-unit product cost of Job 289 is $30,570 ÷ 100 units = $305.70 per unit The point of this part is (a) to get the definitions straight and (b) to underscore that overhead is allocated by multiplying the actual amount of the allocation base by the budgeted rate. 5. Machining Finishing Manufacturing overhead incurred (actual) $13,400,000 $9,800,000 Manufacturing overhead allocated 270,000 hours × $48 12,960,000 200% of $4,300,000 8,600,000 Underallocated manufacturing overhead $ 440,000 $1,200,000 Total underallocated overhead = $1,200,000 + $440,000 = $1,6400,000
Image of page 26
4-27 6. A homogeneous cost pool is one where all costs have the same or a similar cause-and- effect or benefits-received relationship with the cost-allocation base. Mercer likely assumes that all its manufacturing overhead cost items are not homogeneous. Specifically, those in the Machining Department have a cause-and-effect relationship with machine-hours, while those in the Finishing Department have a cause-and-effect relationship with direct manufacturing labor costs. Mercer believes that the benefits of using two cost pools (more accurate product costs and better ability to manage costs) exceeds the costs of implementing a more complex system. 4-32 (15 20 min.) Service industry, job costing, law firm. 1. Professional Labor-Hours Legal Support COST OBJECT: JOB FOR CLIENT INDIRECT COST POOL COST ALLOCATION BASE } } } } DIRECT COST Indirect Costs Direct Costs Professional Labor 2. Budgeted professional labor-hour direct cost rate = Budgeted direct labor compensation per professional Budgeted direct labor-hours per professional = $104,000 1,600 hours = $65 per professional labor-hour Note that the budgeted professional labor-hour direct-cost rate can also be calculated by dividing total budgeted professional labor costs of $2,600,000 ($104,000 per professional × 25 professionals) by total budgeted professional labor-hours of 40,000 (1,600 hours per professional × 25 professionals), $2,600,000 ÷ 40,000 = $65 per professional labor-hour. Budgeted indirect cost rate = Budgeted total costs in indirect cost pool Budgeted total professional labor-hours = 25 hours 1,600 $2,200,000 × = $2,200,000 40,000 hours = $55 per professional labor-hour 3.
Image of page 27

Subscribe to view the full document.

4-28 4. Richardson Punch Direct costs: Professional labor, $65 × 100; $65 × 150 Indirect costs: Legal support, $55 × 100; $55 × 150 $ 6,500 5,500 $12,000 $ 9,750 8,250 $18,000 4-33 (25–30 min.) Service industry, job costing, two direct- and indirect-cost categories, law firm (continuation of 4-32).
Image of page 28
Image of page 29
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern