In: Accounting
EXAMPLE:
G.A. Courtney & Sons build homes. Each home is considered a job; costs are accumulated by job to determine the final cost of a home. The company builds two types of homes. Standard models are framed at factory using high-tech machinery and take little direct labor to complete. Custom homes are framed and finished at the building site using mostly direct labor and few machine hours. Annual estimates for each department follow:
Framing |
Finishing |
Total |
|
Total Overhead |
$400,000 |
$167,600 |
$567,600 |
DLH |
9,700 |
41,900 |
51,600 |
MH |
160,000 |
-0- |
160,000 |
During the year, five jobs were started and completed. Jobs #101 and #103 were custom homes. The remaining jobs were standard models. Direct materials (DM), direct labor (DL), direct labor hours (DLH), and machine hours (MH) for each job follow:
DM |
DL |
Framing DLH |
Finishing DLH |
Total DLH |
MH |
|
Job #101 |
$364,000 |
$280,000 |
1,000 |
19,000 |
20,000 |
500 |
Job #102 |
90,000 |
100,000 |
2,800 |
500 |
3,300 |
46,500 |
Job #103 |
455,000 |
350,000 |
600 |
20,890 |
21,490 |
1,600 |
Job #104 |
144,000 |
160,000 |
2,100 |
800 |
2,900 |
52,000 |
Job #105 |
127,800 |
142,000 |
3,200 |
710 |
3,910 |
59,400 |
Total |
$1,180,800 |
$1,032,000 |
9,700 |
41,900 |
51,600 |
160,000 |
REQUIRED:
(1) Calculate the predetermined overhead rate (POR) using:
(a) A single, plantwide cost pool and DLH as the application base.
(b) Separate total overhead amounts for each department (one total for framing and one for finishing). Use MH as the application base for framing and DLH for finishing.
(2) Use the following format to calculate:
(a) The total costs of each job using the single, plantwide POR (from (1)(a) above).
(b) The total costs of all jobs using the single, plantwide POR (from (1)(a) above).
Note: the “totals” line item at the bottom of the table satisfy this requirement.
DM |
DL |
OH |
Total |
|
Job #101 |
$xxx |
$xxx |
$xxx |
$xxx |
Job #102 |
xxx |
xxx |
xxx |
xxx |
Etc…… |
||||
Totals |
$xxx |
$xxx |
$xxx |
$xxx |
(3) Use the following format to calculate:
(a) The total costs of each job using the two departmental (framing and finishing) PORs (from (1)(b) above).
(b) The total costs of all jobs using the two departmental (framing and finishing) PORs (from (1)(b) above)
Note: the “totals” line item at the bottom of the table satisfy this requirement.
DM |
DL |
Framing OH |
Finishing OH |
Total |
|
Job #101 |
$xxx |
$xxx |
$xxx |
$xxx |
$xxx |
Job #102 |
xxx |
xxx |
xxx |
$xxx |
xxx |
Etc…… |
|||||
Totals |
$xxx |
$xxx |
$xxx |
$xxx |
$xxx |
Req 1-a | |||||
Single vide Oh rate: | |||||
Total Overheads | |||||
Framing | 400000 | ||||
Finishing | 167600 | ||||
Total Overheads | 567600 | ||||
Divide: Total DLH (9700+41900) | 51600 | ||||
OH rate per DLH | 11 | per DLH | |||
Req 1-b | |||||
Framing: | |||||
Total OH of Framing | 400000 | ||||
Divide: MH used in Framing | 160000 | ||||
Framing OH rate per MH | 2.5 | per MH | |||
Finishing: | |||||
Total OH of Finishing | 167600 | ||||
Divide: DLH used in finishing | 41900 | ||||
Finishing OH rate per DLH | 4 | per DLH | |||
Req 2-a/b | |||||
Job Cost Sheet | |||||
JOBS | DM | DL | OH | TOTAL | |
Job 101 | 364000 | 280000 | 220000 | 864000 | |
Job 102 | 90000 | 100000 | 36300 | 226300 | |
Job 103 | 455000 | 350000 | 236390 | 1041390 | |
Job 104 | 144000 | 160000 | 31900 | 335900 | |
Job 105 | 127800 | 142000 | 43010 | 312810 | |
TOTAL | 1180800 | 1032000 | 567600 | 2780400 | |
The Total cost of all the Jobs is $ 2780,400. | |||||
Note: | |||||
Ohh applied to each jobs | |||||
JOBS | Total DLH | OH rate per DLH | OH applied | ||
Job 101 | 20000 | 11 | 220000 | ||
Job 102 | 3300 | 11 | 36300 | ||
Job 103 | 21490 | 11 | 236390 | ||
Job 104 | 2900 | 11 | 31900 | ||
Job 105 | 3910 | 11 | 43010 | ||
Req 3-a/b | |||||
Job Cost Sheet | |||||
JOBS | DM | DL | Framing OH | Finishing OH | Total |
Job 101 | 364000 | 280000 | 1250 | 76000 | 721250 |
Job 102 | 90000 | 100000 | 116250 | 2000 | 308250 |
Job 103 | 455000 | 350000 | 4000 | 83560 | 892560 |
Job 104 | 144000 | 160000 | 130000 | 3200 | 437200 |
Job 105 | 127800 | 142000 | 148500 | 2840 | 421140 |
TOTAL | 1180800 | 1032000 | 400000 | 167600 | 2780400 |
The Total cost of all the jobs is $ 2780,400 | |||||
Note: | |||||
Framing OH applied | |||||
JOBS | Total MH | OH rate per MH | OH applied | ||
Job 101 | 500 | 2.5 | 1250 | ||
Job 102 | 46500 | 2.5 | 116250 | ||
Job 103 | 1600 | 2.5 | 4000 | ||
Job 104 | 52000 | 2.5 | 130000 | ||
Job 105 | 59400 | 2.5 | 148500 | ||
Finishing OH applied | |||||
JOBS | Finishing DLH | OH rate per DLH | OH applied | ||
Job 101 | 19000 | 4 | 76000 | ||
Job 102 | 500 | 4 | 2000 | ||
Job 103 | 20890 | 4 | 83560 | ||
Job 104 | 800 | 4 | 3200 | ||
Job 105 | 710 | 4 | 2840 | ||