Question

Cornerstone Exercise 5.3 (Algorithmic) Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $62,500 Number of moves 2,500 Engineering 113,750 Number of change orders 6,500 Other overhead 343,200 Direct labor hours 52,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job 13-45 Job 13-46 Beginning balance $24,700 $17,500 $3,200 $0 Direct materials $5,000 $8,750 $13,300 $8,500 Direct labor cost $980 $1,050 $1,540 $120 Job 13-43 Job 13-44 Job 13-45 Job 13-46 Number of moves 40 52 27 7 Number of change orders 33 42 18 22 Direct labor hours 980 1,050 1,540 120 By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process. Required: 1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent. Materials handling rate $ per move Engineering rate $ per change order Other overhead rate $ per direct labor hour Hide Feedback Incorrect Check My Work Feedback 1. In job-order costing, departmental overhead rates and activity-based costing affect only the application of overhead and is put on the job-order costing sheet and must include all drivers for which overhead is applied. Hide 2. Prepare job-order cost sheets for each job showing all costs through July 31. When required, round your answers to the nearest dollar. If an amount is zero, enter "0". Heitger Company Job-Order Cost Sheets Job 13-43 Job 13-44 Job 13-45 Job 13-46 Balance, July 1 $ 24700 $ 17500 $ 3200 $ 0 Direct materials 5000 8750 13300 8500 Direct labor cost 980 1050 1540 120 Materials handling Engineering Other overhead Total $ $ $ $ Hide Feedback Partially Correct Check My Work Feedback 2. The job-order cost sheet must include a unique number or name for this particular job, all direct costs, and all overhead costs associated with the job. 3. Calculate the balance in Work in Process on July 31. $ 4. Calculate the cost of goods sold for July. $ 5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46? Cornerstone Exercise 5.3 (Algorithmic) Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $62,500 Number of moves 2,500 Engineering 113,750 Number of change orders 6,500 Other overhead 343,200 Direct labor hours 52,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job 13-45 Job 13-46 Beginning balance $24,700 $17,500 $3,200 $0 Direct materials $5,000 $8,750 $13,300 $8,500 Direct labor cost $980 $1,050 $1,540 $120 Job 13-43 Job 13-44 Job 13-45 Job 13-46 Number of moves 40 52 27 7 Number of change orders 33 42 18 22 Direct labor hours 980 1,050 1,540 120 By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process. Required: 1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent. Materials handling rate $ per move Engineering rate $ per change order Other overhead rate $ per direct labor hour Hide Feedback Incorrect Check My Work Feedback 1. In job-order costing, departmental overhead rates and activity-based costing affect only the application of overhead and is put on the job-order costing sheet and must include all drivers for which overhead is applied. Hide 2. Prepare job-order cost sheets for each job showing all costs through July 31. When required, round your answers to the nearest dollar. If an amount is zero, enter "0". Heitger Company Job-Order Cost Sheets Job 13-43 Job 13-44 Job 13-45 Job 13-46 Balance, July 1 $ 24700 $ 17500 $ 3200 $ 0 Direct materials 5000 8750 13300 8500 Direct labor cost 980 1050 1540 120 Materials handling Engineering Other overhead Total $ $ $ $ Hide Feedback Partially Correct Check My Work Feedback 2. The job-order cost sheet must include a unique number or name for this particular job, all direct costs, and all overhead costs associated with the job. 3. Calculate the balance in Work in Process on July 31. $ 4. Calculate the cost of goods sold for July. $ 5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46? $

Answer 1

1. Computation of Activity Rates:

Activity Cost Pool	Cost Driver	Overhead Cost	Volume of Cost Driver	Activity Rate
Direct Materials Handling	Number of Moves	$ 62,500	2,500	$ 25 per move
Engineering Change	Number of Change Orders	113,750	6,500	$ 17.50 per change order
Other Overhead	Direct Labor Hours ( DLH)	343,200	52,000	$ 6.60 per DLH
		$ 519,450

2. Heitger Company

Job Order Cost Sheets:

	13-43	13 - 44	13 - 45	13 - 46	Total
Beginning Balance	$ 24,700	$ 17,500	$ 3,200	$ 0	$ 45,400
Costs incurred during July
Direct Materials	5,000	8,750	13,300	8,500	35,550
Direct Labor	980	1,050	1,540	120	3,690
Manufacturing Overhead:
Direct Material Handling	1,000	1,300	675	175	3,150
Engineering Change	577.50	735	315	385	2,012.50
Other Overhead	6,468	6,930	10,164	792	24,354
Total Manufacturing Overhead	8,045.50	8,965	11,154	1,352	29,516.50
Total Manufacturing Costs	14,025.50	18,765	25,994	9,972	68,756.50
Total cost of WIP	38,725.50	36,265	29,194	9,972	114,156.50
Completed and Transferred Out	(38,725.50)	(36,265)	--	--	74,990.50
Ending balance	$ 0	$ 0	$ 29,194	$ 9,972	39,166

3. Work in Process, Balance, July 31 : $ 39,166

4. Cost of Goods Sold : $ 74,990.50

5. If job 13-46 required no engineering change, total cost = $ 9,972 - $ 385 = $ 9,587.